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 per cent, by at least a quarter point — and possibly by more. Last Friday, Chile became the first big Latin American economy to reduce rates post-pandemic, cutting borrowing costs by a full percentage point to take them down to 10.25 per cent.
“Even if the fight against inflation is not finished, Latin American central banks can take a victory lap,” said Ernesto Revilla, chief Latin America economist at Citi in New York. “They distinguished themselves in this cycle . . . by their discipline, autonomy, commitment and clear communication. Monetary policy in the inflation targeters — Chile, Brazil, Mexico, Peru and Colombia — is giving a lesson to the world. ”
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 per cent, countering the inflationary effects of generous public spending and rate cuts unleashed in response to the Covid-19 pandemic. The US Federal Reserve did not start raising rates until a year later in March 2022. The European Central Bank was even slower, first tightening policy in July last year.
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Source: www.ft.com
ENB
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