As expected, Brazil‘s Central Bank hiked interest rates on Wednesday evening to 7.5% from 7.25%.
That’s the overnight interest rate and nowhere near what actual Brazilians pay for credit. But the rate is important to bond investors in a yield hungry world, where Brazilian local currency debt is some of the most attractive investment grade bonds in the world.
Central Bank president Alexandre Tombini hinted several times over the last week that the monetary policy committee was “attentive” to rising interest rates. The 12 month rolling IPCA-15 inflation rate is around 6.4%, on the high end of the Bank’s tolerance band.
“We expect the Central Bank to deliver three more consecutive 25 basis point rate hikes in the coming meetings…lifting the rate up to 8.25% by August,” Salomon said this evenint.