Brazil Bumps up Rate 75bp

Brazil’s monetary policy committee, or Copom, increased the benchmark Selic rate by 75bp on Wednesday to 13.00% through a unanimous decision. Economists were divided in their expectations for a 50bp or 75bp hike. An accompanying statement said the move is designed to curb inflation. “This suggests that the projected inflation path might have deteriorated, and had the central bank stuck with a 50bp pace, the convergence of inflation to the target would have been longer than desirable,” says Goldman Sachs. “According to our baseline path, today’s 75bp hike should be followed by two more hikes of 75bp in September and October, and two concluding 50bp hikes in December and January, to end the tightening cycle,” the shop adds. That would take the Selic to 15.50%, just under the 15.75% last seen in April 2006.