Brazil central bank warns of rate hike

Bloomberg

Brazil’s central bank said inflation pressures could persist in the beginning of the year, eventually leading to an interest rate hike, after a report showed consumer prices surged in December by
the most since 2003.
While reaffirming that a record-low rate of 2% is adequate for now, Monetary Policy Director Bruno Serra said Brazil shouldn’t have such a level of monetary stimulus in normal circumstances, when the economic impact of the pandemic subsides. Inflation jumped 1.35% in December from the month prior, topping all estimates in a Bloomberg survey, the nation’s statistics bureau reported.
Latin America’s largest economy is getting pummeled by faster-than-forecast inflation that the central bank
has repeatedly described as transitory.
“We have an extraordinarily high degree of monetary stimulus and this will be normalised,” Serra said in a event with investors. “It’s natural to understand that stimulus will be withdrawn. This debate regarding higher rates, which is already happening in financial markets, will be held by the central bank at some point.”
Latin America’s largest economy is getting pummeled by faster-than-forecast inflation that the central bank has repeatedly described as transitory. Prices are rising due to factors including a weak currency, the lingering effects of emergency government spending and higher costs of goods such as oil. Put together, interest rate future traders see borrowing costs rising as early as March.
Swap rates on the contract due in January 2023, which indicate investor expectations for monetary policy, rise as much as 13.5 basis points in the morning before paring gains in early afternoon trading. The real gained 1.1% to 5.4461 per dollar.