Brazilian central bank raises interest rates
The Brazilian central bank on Wednesday raised its benchmark interest rate to a three-year high, surprising the markets.
The decision to raise rates to 11.25% from 11% was not unanimous, as five members voted in favour of the hike but three voted against.
In a statement, the bank’s monetary policy committee said: "Since the last meeting, among other factors, the intensification of adjustments of relative prices in the economy has turned the balance of risks for inflation less favourable."
Jose Carlos Faria, chief economist at Deutsche Bank, said the move is “a big surprise”.
“This looks look the ‘credibility hike’ that the market would have expected should the opposition have won the presidential election on Sunday.
“We believe the much faster-than-expected adjustment in interest rates is positive for market sentiment (as it strongly signals austerity), and could contribute to reduce the total size of the tightening cycle,” he wrote on Thursday.
During the presidential elections in Brazil, interest rates were one of the most controversial topics during the debates between President Dilma Rousseff and her opponent Aécio Neves.
Rousseff’s re-election last Sunday put pressure in her administration to put in place policies to strengthen the growth outlook and reduce inflation, Standard & Poor analysts have said.
As of 10:46 the Brazilian real was weakening 0.04% versus the US dollar to reach 2.4619.