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23 Sept 2021

Brazil; Third Big Interest Hike Coming Next Month

The Index Today

The central bank of Brazil has announced it will raise interest rates by 100 basis points as it continues to struggle with high inflation. This will be the country’s third biggest hike to occur in October. According to Copom, the banks rate-setting committee, the decision to raise benchmark rate to 6.25% was made unanimously.

Brazil has been tackling its ever growing problem of surging inflation rate, lifting its benchmark rate from 2.00 in the beginning of the year and now reaching double digits. The rate setting committee has also outlined plans to push forward tightening of monetary policies and add another full percentage point rate increase in October.

The statement read, “This pace of rate increases is the most appropriate to guarantee inflation convergence to the target at the relevant horizon and, simultaneously allow the committee to obtain more information regarding the state of the economy and the persistence of shocks.”

This hardline approach was taken after realizing the bleak fiscal outlook of the country and its weakening currency. The US feds rate hike has also added more pressure to other markets across the globe. On the other hand, experts are saying that the immediate tightening may prevent a rebound of the economy and will ultimately kill business growth.

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