Tombini starts with a hike, attention now turns to fiscal policy

Last night, the Brazilian Central Bank (BCB) hiked interest rates by 50bps to 11.25%. Rates will probably be increased by another 50bps at March’s meeting too. But if rumours of a fiscal tightening worth 1.5% of GDP prove to be true, rates are unlikely to reach the levels currently priced into the market and may even conceivably begin to fall later this year.

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