Brazil Central Bank Issues Rate Hike After Election

Brazil’s central bank raised interest rates on Wednesday, surprising investors with a move that signals President Dilma Rousseff could make more market-friendly policy changes after her narrow re-election victory on Sunday.

In a divided vote, the central bank’s board decided to raise its benchmark Selic rate by 25 basis points to 11.25 percent. All 43 economists surveyed in a Reuters poll this week expected the bank to keep the Selic at 11 percent.

With the hotly contested presidential race over, the central bank moved swiftly to anchor inflation expectations at a time when markets are doubtful Rousseff is willing to overhaul her policies to regain the trust of investors.

The bank said the balance of inflation risks has become less favorable since its last rate-setting meeting in early September due to more intense price increases.

“In light of that, the committee considered it appropriate to adjust monetary conditions in order to guarantee, at a lower cost, the prevalence of a more benign inflation outlook in 2015 and 2016,” the bank said in its statement.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza