How Much Will Brazil Hike Interest Rates?

Brazilian markets rose modestly, this Monday, ahead of a flood of U.S. earnings releases and interest rate hikes. Brazil’s central bank is expected to tighten monetary policy on Wednesday.

Brazil’s benchmark Bovespa Index added 43.23 points, or 0.18%. Brazilian issues edged higher, with rate hike fears limiting buying after oil prices topped US$ 55 a barrel in pre-session trading.

Investors remain concerned that the central bank will increase its benchmark Selic rate by half a percentage point to 16.75% on Wednesday to check any resulting inflationary pressures, outpacing the modest quarter percentage point hike most analysts expect.

A rise in rates would mark the second hike in two months, representing the conclusion to a money-loosening cycle that lifted Brazil out of last year’s recession and drove growth this year.

Meanwhile, shares of Embratel declined. The long-distance telecom provider will post quarterly earnings following the close. Analysts foresee unchanged revenues, but slightly stronger earnings on cost controls and higher rates.

Also, long steel maker Gerdau SA was active on word it plans to invest 750 million reais in a plant in São Paulo state that will begin operation in May 2005.

The company reopened plans to eventually produce up to 1.3 million tons of steel at the new mill, driven by Brazil’s economic recovery, and 1.2 million tons in steel beams. Production is scheduled to begin in May 2005.

Thomson Financial Corporate Group


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