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Brazilian interest rates to rise by less than market expects

Brazil’s decision to hike interest rates by a further 50bp last night will have been bolstered by the extent of the recent slide in the real. But the rise in market rate expectations over the past month looks more difficult to justify. While another increase in the Selic is all but guaranteed in October, we doubt that the aggressive tightening that is currently priced into the market will materialise.

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