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MNI WATCH: Copom Set To Accelerate Hiking Pace To 50BPS

Central Bank of Brazil is expected hike rates by 50 basis points to 11.25%.
MNI (BRASILIA)

The Central Bank of Brazil (BCB) is expected to accelerate the pace of its rate hikes, raising the official Selic rate by 50 basis points to 11.25% Wednesday amid a worsening inflation outlook driven by fiscal risks and significant currency depreciation.

The real has recently faced extreme volatility, reaching its lowest level since May 2020 at USD5.87 Friday, down from around 5.45 at the beginning of October.

Investors are awaiting the Ministry of Finance's announcement of government spending cut measures against the backdrop of rapid currency swings. 

Minister Fernando Haddad canceled a trip to Europe to remain in Brazil this week to discuss the package with President Luiz Inácio Lula da Silva and the real strengthened Monday, trading at USD5.78, with expectations of the measures being announced soon. 

The foreign exchange market was also impacted by concerns surrounding the United States election on Tuesday. (See MNI: Latam Policymakers Concerned About US Elections at IMF)

The Brazilian government has room to freeze an additional BRL 20 billion in expenditures from its 2024 budget if necessary, on top of the BRL 13.3 billion blocked two weeks ago, Planning and Budget Ministry Executive Secretary Gustavo Guimaraes told MNI last month. (See MNI INTERVIEW: More Brazil Budget Freezes If Needed -Guimaraes)

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MNI (BRASILIA)

The Central Bank of Brazil (BCB) is expected to accelerate the pace of its rate hikes, raising the official Selic rate by 50 basis points to 11.25% Wednesday amid a worsening inflation outlook driven by fiscal risks and significant currency depreciation.

The real has recently faced extreme volatility, reaching its lowest level since May 2020 at USD5.87 Friday, down from around 5.45 at the beginning of October.

Investors are awaiting the Ministry of Finance's announcement of government spending cut measures against the backdrop of rapid currency swings. 

Minister Fernando Haddad canceled a trip to Europe to remain in Brazil this week to discuss the package with President Luiz Inácio Lula da Silva and the real strengthened Monday, trading at USD5.78, with expectations of the measures being announced soon. 

The foreign exchange market was also impacted by concerns surrounding the United States election on Tuesday. (See MNI: Latam Policymakers Concerned About US Elections at IMF)

The Brazilian government has room to freeze an additional BRL 20 billion in expenditures from its 2024 budget if necessary, on top of the BRL 13.3 billion blocked two weeks ago, Planning and Budget Ministry Executive Secretary Gustavo Guimaraes told MNI last month. (See MNI INTERVIEW: More Brazil Budget Freezes If Needed -Guimaraes)

Keep reading...Show less