How Far Will the Current Monetary Tightening Go?

BRAZIL ECONOMICS - Report 18 May 2015 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

The market is reacting to the signals sent by the Central Bank and expects a continuing increase in the interest rate. Last week the yield curve indicated that the market expects the SELIC rate to be raised by 50 basis points at the next COPOM meeting, and that this would not be the last hike. After a period of manifest preference for lower interest rates and acceptance of inflation above the target, the Bank has become more resolute, reaffirming it wants to bring inflation down to 4.5%.

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