BRASILIA, (Reuters) – Brazil surprised economists by maintaining an aggressive pace of interest rate hikes yesterday to head off a surge in inflation, even as Latin America’s largest economy struggles to gain momentum.
The central bank’s monetary policy committee, known as Copom, voted unanimously to raise the so-called Selic rate
to 10.50 percent from 10 percent – its highest in two years.
Only 14 out of 44 economists polled by Reuters expected the bank to raise rates by 50 basis points. A majority of market traders predicted the bolder rate increase, which marked the bank’s seventh straight hike.
The bank slightly changed its decision statement, reiterating that the rate increase was part of an adjustment process that started in April, but added that the decision was taken at “this moment.”
The phrase reinforces the bank’s previous guidance that it may slow the pace of rate hikes or even end one of the world’s most aggressive monetary tightening cycles, economists say.
“The bank is telegraphing that they will slow the pace to 25 bps at next meeting or even interrupt the cycle,” said Alberto Ramos, head of Latin America economic research for Goldman Sachs.
