Financial Times 08/02/2023
Latin America’s central banks set to declare victory in the war on inflation
Brazil, one of the nimblest and most aggressive emerging markets to raise interest rates, is expected to start cutting them on Wednesday as Latin America reaps the benefit of moving faster than G7 nations to fight inflation.
Most economists think rate-setters at the Banco Central do Brasil will cut their benchmark rate, now 13.75 percent, by at least a quarter point — and possibly by more.
In a series of hawkish moves that began in March 2021, Brazil’s rate-setters jacked up the Selic rate from an all-time low of 2 percent, countering the inflationary effects of generous public spending and rate cuts unleashed in response to the Covid-19 pandemic.
Andrea Damico, chief economist at asset manager Armor Capital, predicted a 50 basis point cut.
“A drop in interest rates is not premature. We see a very consistent drop in [inflation] expectations, especially for the long term,” she said. “We also believe it will probably signal that 50 points is a suitable pace for the next meeting”.
Source: https://www.ft.com/content/29371345-70a9-4885-8db4-2a9b2f097beb
