Brazilian Rate Hike of 25 Basis Points

June 8, 2011

The Bank of Brazil’s monetary policy committee, known as COPOM, has implemented its seventh rate hike, lifting the Selic Rate to 12.25% from 12.0%.  The action was widely forecast and followed consecutive increases in January, March, and April.  Five cuts totaling 500 basis points were made between January 2009 and September of that year.  The first hike of the ensuing  normalization cycle was made in April 2010.  Inflation now hovers at the top of the central bank’s 2.5 – 6.5% target range.  Officials are now tightening in smaller-sized increments but are leaving the door open to more movesHigh commodity prices, slower global demand, and a pricey exchange rate have made continuing tightening appear ill-advised to some analysts.  Officials will have to tread more carefully.  COPOM next meets on July 19-20.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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