The minutes to last week’s central bank meeting in Brazil raised the possibility that policymakers will respond to the worsening inflation outlook by hiking interest rates. And despite the sharp shift down in US interest rate expectations since that meeting, markets still appear to be partly pricing in a hike in Brazil. For now, our central scenario is that rates will be left on hold for a prolonged period. But further sharp falls in the real and a material worsening in the inflation outlook could force Copom to act – although we suspect it would intervene in the FX market before lifting the Selic rate.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services