Analysts hail Brazil Central Bank monetary tightening
December 4, 2014, 8:50 am

In her second term, Brazilian President Dilma Rousseff has vowed to adopt more business-friendly policies [Image: gov.br]

“The BCB thus showed its commitment to fight inflation hovering stubbornly high around the BCB’s upper target band of 6.5% for most of this year, but the move will also weigh further on the sluggish economy,” said Nordea in a statement on Thursday.

The Brazilian central bank’s monetary policy committee raised its benchmark Selic rate by 50 basis points to 11.75 per cent in a unanimous vote on Wednesday surprising analysts who expected a 25-basis-point hike.

Nordea has forecast one more hike which will take the policy rate up to 12 per cent by mid-2015.

“Markets had priced in a 50bp hike, as more hikes could be on the way, but we still expect it to be BRL (Brazilian real) supportive,” said the statement.

In her second term, Brazilian President Dilma Rousseff has vowed to adopt more business-friendly policies while continuing focus on “economic solidarity”.

“We will continue prioritizing social inclusion, employment, access to education, security and political and economic stability, investment in infrastructure and modernization of the country and the increase in income of the people,” said Rousseff last week.

New finance minister, Joaquim Levy, has promised to cut spending and that the government will limit transfers to the state development bank BNDES and clean up its finances to rebuild confidence.

On Wednesday, Rousseff sent out a message to investors at a JP Morgan conference where she promised fiscal discipline.

“Our new economic team will work to gradually but structurally lift our primary surplus so we can stabilize and reduce the public sector’s gross debt in relation to GDP,” Rousseff was quoted by Reuters.

Rousseff won a second four-year mandate in October’s general elections. Election data showed that most of Rousseff’s votes came from the poorer north and northeast, where social programs begun by former-President Lula and continued by Rousseff, both of the Workers’ Party (PT), have lifted millions from poverty.

TBP