Brazil Seen Sticking on Rates

Brazil’s central bank is expected to keep its monetary policy rate on hold at 8.75% today. Morgan Stanley says that it is likely to hike this year, but is not in a rush. “Shrinking slack in the economy and rising inflation expectations can eventually force the hand on the monetary authorities,” it says. “However, the bank is likely to wait for a few more months to assess where growth settles after the initial rebound from recession,” it adds. Bulltick meanwhile believes Brazil may tighten 150bp by the end of the year starting in Q2. Standard Chartered predicts a first rate increase of 50bp in March. And Goldman expects Copom to wait until April to initiate the tightening cycle, though it sees a risk of moving in the month before. A central bank survey shows consensus estimates are for the rate to reach 11.25% by year-end.