In World Of Falling Interest Rates, Brazil Starts To Tighten

As expected, Brazil’s Central Bank hiked interest rates on Wednesday evening to 7.5% from 7.25%.

That’s the overnight interest rate and nowhere near what actual Brazilians pay for credit. But the rate is important to bond investors in a yield hungry world, where Brazilian local currency debt is some of the most attractive investment grade bonds in the world.

Central Bank president Alexandre Tombini hinted several times over the last week that the monetary policy committee was “attentive” to rising interest rates. The 12 month rolling IPCA-15 inflation rate is around 6.4%, on the high end of the Bank’s tolerance band.

Earlier in the week, Nomura Securities’ head of emerging markets Americas, Tony Volpon, clued in on Tombini’s choice of words and said that whenever Tombini used the word “attentive” in relation to inflation, the committee raised interest rates.