EMERGING MARKETS – Brazil surges as high inflation spurs bets on rate hikes

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By Susan Mathew and Ambar Warrick

January 11 (Reuters)The Brazilian real rose the most among Latin American currencies on Tuesday after a larger-than-expected spike in annual inflation raised expectations of another sharp interest rate hike by the central bank.

The is real BRBY added 1.5% after data showed annual inflation ended in 2021 at a six-year high of 10.06%. This exceeded expectations and was well above the central bank’s 3.75% target range and the 5.25% limit of its tolerance range.

“While inflation has now passed its peak and is expected to decline further, (Brazil’s central bank) will continue to aggressively tighten monetary policy at its next meeting,” said William Jackson, chief emerging markets economist. at Capital Economics.

“We expect another 150 basis point hike, to 10.75%, in early February. After that, the pace of tightening will likely slow to a 75bp rise in March, when we expect the cycle to end. “

Brazil’s central bank’s monetary policy committee, Copom, has been the most aggressive among the world’s central banks in fight inflation.

Broader Advanced Latin American currencies, with units in Colombia COP = and Chile CLP = supported by higher oil and copper prices. WHEREMET / L

Psol d’eru PEN = rose 0.5% to a nearly six-month high, also supported by strengthening copper prices. But the country reported its highest weekly number of COVID-19 cases on record.

The Chilean peso rose 0.8% inA Reuters poll showed Chile’s central bank is likely to hike lending rates by 100 basis points to 5% this month, a move that will be positive for the peso.

mexican peso MXN = Slipped 0.1% from nearly two-month highs after three consecutive days of gains.

Mexican industrial production fell month-over-month in November, data showed, raising the odds the economy entered recession last quarter, said Nikhil Sanghani, emerging markets economist at Capital Economics. .

Mexican President Andres Manuel Lopez Obrador said on Tuesday he was doing well after announcing he had contracted COVID-19 for the second time.

Latin American equities firm up. Brazilian miners Usiminas USIM5.SA and Vale VALE3.SA won the Sao Paulo Bovespa Index .BVSP 1.4% higher as iron ore and steel futures surged due to supply issues. IRON-ORE/

The Brazilian supply could experience even more problems with heavy rainfall in the southeastern part, prompting miners to suspend some operations.

Actions of Chile .SPIPSA reached their highest level in almost a month.

Emolten markets reacted little to testimony from Federal Reserve Chairman Jerome Powell, who suggested the US central bank would act more quickly when tightening policy.

Main Latin American stock market indices and currencies:

Last

% daily change

MSCI Emerging Markets .MSCIEF

1243.54

0.91

MSCI Latin America .MILA00000PUS

2133.96

2.53

Brazil Bovespa .BVSP

103406.27

1.43

Mexico CPI .MXX

53053.29

0.41

Chile IPSA .SPIPSA

4387.10

2

Argentina MerVal .MERV

84585.39

1.002

Colombia COLCAP .COLCAP

1405.27

0.79

Currencies

Last

% daily change

Real brazil BRBY

5.5889

1.47

mexican peso MXN = D2

20.3776

-0.09

Chilean peso CLP =

828.7

0.76

Colombian peso COP =

3989.76

1.44

Peruvian soil PEN = PE

3.9017

0.48

Argentine peso (interbank) ARS = RASL

103.5600

-0.06

(Reporting by Susan Mathew in Bangalore; Editing by Susan Fenton and Jonathan Oatis)

(([email protected]; + 91-80-6287-2704;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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