The big news from yesterday’s central bank meeting in Brazil isn’t the decision to raise interest rates to a three-year high of 12.25% - this was expected by pretty much everyone. Instead, the major surprise was that policymakers seem to be shifting towards a more hawkish position. We had previously thought that yesterday’s move would signal the end of the tightening cycle, but have now pencilled in another 50bp increase to 12.75%.
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