Brazil Expected to Start Hiking Rates

Market consensus points to Brazil’s Copom leaving its Selic rate unchanged until April, but JPMorgan forecasts it will hike its rate today by 50bp. The bank says that growth and inflation indicators will send signals that the tightening cycle is already overdue, with tight utilization rates and increasing inflation expectations putting the target in danger. Goldman Sachs agrees that there will be a 50bp hike today, taking the rate to 9.25%. “In all, we believe that the tightening cycle will amount to 375bp, with Copom raising Selic to 12.50% by October 2010,” the shop says. Morgan Stanley, in line with consensus, expects a first hike in April, although it does not rule out tightening today. “A front-loaded path could make it easier for the Copom to avoid changing policy rates too close to the October presidential elections,” it says.