Economics
Brazil’s Central Bank Cornered as Populism Fuels Rate Hike Bets
- Swap curve is quickly moving to price in a 50bps hike in March
- Tightening cycle may further weigh on country’s recovery
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Brazil’s market selloff put the central bank in a tough position and raised the stakes for its next policy meeting.
The monetary authority’s independence will be put to the test after Jair Bolsonaro replaced Petrobras’ chief executive officer on Friday following a feud over fuel prices, triggering a slump in local assets. While traders are increasing bets on a more aggressive rate hike in March, the government may pressure officials to keep rates low for longer as the economy struggles to rebound.