Brazil Seen Tightening Further

The market expects Brazil’s central bank to increase its monetary policy rate by 75bp to 11.0% today. Bulltick agrees with consensus, even though in mid-July prices declined 0.09% month-on-month on the back of falling food and transportation prices. Goldman Sachs also expects 75bp, adding that it does not believe the central bank will signal further rate cuts for future meetings. Elsewhere, Morgan Stanley says a 50bp hike is a real possibility. “The May GDP proxy that was published by the central bank last week . . . showed a healthy 9.8% increase over a year ago, [but] on a sequential basis the economy came to a halt,” the shop says.