Brazil to hike rates by 50 bp – TDS

FXStreet (Edinburgh) – Strategist Paul Fage at TD Securities suggested the Brazilian central bank could tighten its policy further at today’s meeting.

Key Quotes

“At today’s Copom meeting we expect the BCB to hike the Selic rate by 50 bps to 14.25%. With CPI inflation continuing to creep upwards, the BRL under pressure, and fiscal tightening to be less than expected, we think the BCB has no alternative but to hike rates further. We think this will be the last hike, although the risks have increased that it won’t be”.

“Yesterday, S&P moved Brazil to negative outlook from stable, keeping the rating at BBB-. Downgrades from Moody’s and Fitch are likely soon. There is a real risk that Brazil loses its investment grade rating from at least one of the agencies next year”.

“With negative growth this year and possibly next year, with increasing political risks and with the likelihood of Fed rates hikes this year, we expect that USDBRL will continue to trend higher reaching a peak of 3.50 in Q2 2016, although, we think the risks are to the upside in our forecast”.

Strategist Paul Fage at TD Securities suggested the Brazilian central bank could tighten its policy further at today’s meeting…

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