Brazil nudges double digits as central bank raises rates
Brazilian base rates could hit 10% before year-end, analysts say after Copom set the Selic rate at 9.5% on Wednesday
The Central Bank of Brazil, led by Alexandre Tombini, is
likely to raise the Selic rate at its next meeting, analysts
said after a 50 basis point rise to 9.5% on Wednesday.
Analysts were split over how high the Selic rate would rise
this year, though.
Wednesday’s move was the bank’s
fifth consecutive increase, as it targets inflation.
Bradesco analysts said they expected a 50 basis point hike
in November. Goldman Sachs analysts agreed, saying the
consistency of the central bank’s statements meant
another 50 basis point lift was ahead.
"The unchanged statement implies that the case for reducing
the magnitude of hikes to 25 basis points in November would
have to be supported by better-than-expected inflation data
and/or worse-than-expected growth data, or a meaningful dovish
shift in the global macro outlook," the bank said.
Copom’s last split decision was in April, when
six committee members voted in favor of a hike and two against,
as the rate increased 25 basis points. Since then, the
committee has voted unanimously in favor of 50 basis points
Another rate rise at the next meeting was the most likely
outcome, said Bank of America Merrill Lynch analysts. "Although
a 50bp increase appears to be the next move in the November
meeting, the weakness in recent economic data continues to
point towards the end of the tightening cycle before year-end,"
the bank said.
But Barclays disagreed. The bank said a 25 basis point
increase was its best guess for a November move.
Barclays said it expected growth to slow in the second half
of the year, with GDP expansion of 0.2% and 0.3% in the third
and fourth quarters, down from 1.5% in the second quarter.
The problem with Brazil