Brazil to slow rate hike pace

Bloomberg

Brazil’s central bank will likely slow the pace of interest rate increases as it calibrates one of the world’s most aggressive monetary tightening cycles despite a breakneck surge in local fuel prices.
Policy makers will raise the benchmark Selic by 100 basis points to 11.75%, according to 38 of 44 economists in a Bloomberg survey. Four of them expect a boost of 125 basis points, while the others foresee a fourth straight hike of 1.5 percentage points.
The bank is struggling with with annual inflation above 10% that is likely to last longer than initially thought. Price gain expectations leaped after state-controlled Petrobras raised diesel costs by as much as 25%, following oil’s spike in international markets. That’s an additional problem for Brazil’s stalled economy, with gross domestic product likely to grow just 0.5% this year, partly due
to the aggressive tightening
campaign that isn’t over yet.
The decision will be published on the bank’s website after 6:30 p.m. local time in Brasilia together with a statement from its board, which currently has seven voting members given that two new directors await confirmation in congress.
Policy makers are expected to reference the “cumulative effects” of a rate-hike cycle that has totaled 875 basis points so far. Moreover, Brazil’s financial conditions have tightened with surging oil prices, supporting the case for a more cautious central bank.