COPOM Ups The Ante

July 2008 | Economic Analysis

Brazilian central bankers were unanimous in their decision to raise the Selic rate by 75bps to 13.00% during the COPOM meeting on June 23. We had been leaning towards a hike of this magnitude ever since real interest rates moved below the IPCA headline inflation indicator (see chart). Real interest rates currently stand at 5.8%, with headline inflation at 6.1% y-o-y in June. Despite the 75bps interest rate hike, however, we believe that more hikes of a similar magnitude will be necessary to push real interest rates back above inflation.

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