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Brazilian Traders Pile Into Rarest of Bets in Zero-Rates World

  • A 25 basis point hike of the Selic rate is priced in for March
  • Inflation spike, deteriorating fiscal accounts may prompt move
Roberto Campos Neto, president of the Central Bank of Brazil, listens during a press conference in Brasilia on May 29, 2019.
Roberto Campos Neto, president of the Central Bank of Brazil, listens during a press conference in Brasilia on May 29, 2019.Photographer: Andre Coelho/Bloomberg
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It is heresy in economic circles nowadays to talk about raising interest rates. With the virus still raging and economies still sputtering, rates need to be held at record lows for a long, long time, according to consensus thinking all over the globe.

Except in Brazil. Traders there are frantically driving up interest-rate futures in anticipation that policy makers will lift the 2% benchmark rate next month. Encouraged by debate among central bankers themselves about how soon to tighten monetary policy, traders have determined that at a minimum the Selic rate will be raised by a quarter point in March, and maybe even as much as a half point.