The decision by Brazil’s monetary policy committee (COPOM) to raise interest rates by another 50bp to 13.75% was expected, but the fact that the accompanying statement was left unchanged from the last meeting – thus leaving the door open to further rate hikes – was a little more surprising. It could be that policymakers are waiting until the next Inflation Report, due at the end of this month, to convey their next moves. But in our view we’re nearing the point where the benefits of additional rate hikes in terms of tackling inflation are outweighed by the costs in terms of a rapidly deteriorating economy.
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