Political Risk Latin America Blog @PolRiskLatam

Brazil’s central bank releases the doves

Posted in News and Articles, Political Risk by politicalrisklatam on March 10, 2011

by Joe Leahy for Financial Times – Beyond Brics, March 10th, 2011.

Some central bank statements are like passages from the Bible, open to almost any interpretation. The latest minutes from Brazil’s monetary policy committee (Copom) are an example. The meeting took place last week and resulted in a 50-basis point rise in the bank’s benchmark Selic rate to 11.75 per cent, the second such increase this year.

In the minutes, released today, the committee recognises that the outlook for inflation is “not evolving favourably”, but then goes on to present an “alternative scenario” in which inflation will be above the central bank’s target of 4.5 per cent, plus or minus 2 per cent this year before falling below the target in 2012.

The conclusion is somewhat unclear, but the market quickly interpreted the overall direction of the meeting as dovish.

Yields on Brazilian interest rate futures contracts dropped after the minutes were published. The contract due January 2012 fell to 12.43 per cent from 12.55 per cent in the previous session, Reuters reported. (continue reading… )



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