Brazil’s central bank meets today and there’s some sense it might raise interest rates for the first time since July 2008. Chances appear to be 50-50 based on what economists have been saying in the run-up to the meeting. But the fact that it’s even a possibility speaks volumes about Brazil’s economy and the potential for inflation – even as other major economies continue easing monetary policy (Bank of Japan just did so overnight.) Win Thin at Brown Brothers Harriman argues, in fact, that the only reason NOT to hike rates is political: this may be the last meeting run by Henrique Meirelles, the central bank governor mulling a run for political office in the fall elections. Meirelles may not want to tighten liquidity ahead of a campaign. The pro-tightening camp points out that Brazilian inflationary expectations are rising – and the bank can’t wait too long to take action. Stay tuned!
2 Comments to Will Brazil Hike Interest Rates Today?
The fact that people think Meirelles may run for office influences their expectation of Central Bank behavior. Corollary: central bankers should NOT run for office.
March 17, 2010
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