Brazil: Central bank could raise rate in January – TDS

By FXStreet FXStreet (Córdoba) – According to Sacha Tihanyi, Senior EM Strategist at TD Securities, the probabilities of another rate hike in Brazil has increased significantly.

Key Quotes:

“The market should see heightened sensitivity to inflation projection changes in the Q4 report due to recent market events and the hawkish shift in monetary policy bias at the November meeting.”

“We see a significantly increased probability that the BCB hikes by 50bps, and some degree of risk for more, at the January meeting, given the development in inflation expectations and a more challenged fiscal consolidation trajectory.”

“Tomorrow the Banco Central Do Brasil releases its Q4 inflation report, approximately one month before the next COPOM meeting. A number of developments have significantly raised the probability that the BCB hikes by 50bps in January. These developments include: the hawkish shift in statement tone along with the two COPOM member dissents to hike at the November meeting, the cut in the 2016 primary fiscal surplus target to 0.5% of GDP from 0.7%, the second credit rating downgrade to junk status by a major rating agency, as well as the exit of Joaquim Levy as Finance Minister and his replacement by Nelson Barbosa (Barbosa is seen as more Keynesian …read more

Source:: FX Street