Political Risk Latin America Blog @PolRiskLatam

Brazil set to raise interest rates

Posted in News and Articles, Political Risk by politicalrisklatam on June 8, 2011

by Jonathan Wheatley for Financial Times – Beyond Brics, June 8th, 2011.

Brazil’s central bank is likely to raise its policy interest rate by 0.25 percentage points to 12.25 per cent a year on Wednesday evening as it continues its efforts to bring consumer price inflation down towards the government’s 4.5 per cent a year target, from about 6.55 per cent today.

It comes as investors absorb the forced resignation on Tuesday evening of Antonio Palocci, chief minister to president Dilma Rousseff and widely regarded as the most fiscally orthodox member of her fledgling government.

Many analysts expect little immediate impact from his resignation, which came after weeks of accusations. Here is Siobhan Morden of RBS Securities:

We believe that the departure of Chief of Staff Palocci should have only a temporary and limited impact on overall policy risk. The markets have been trading on his inevitable departure but yet the “policy risk” premium had only increased a maximum of 5bp on the longest DI tenors in the past couple days. (continue reading… )

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