Rate Hikes in Brazil and Ukraine – Currency Thoughts

Rate Hikes in Brazil and Ukraine

December 12, 2024

The Central Bank of Brazil’s Selic interest rate was lifted by a greater-than-predicted full percentage point to a one-year high of 12.25%. This more forceful move than previous interest rates totaling 75 bps in September and November, according to a released statement from officials was necessitated by a backdrop of “additional de-anchoring of inflation expectations, an increase of inflation projections, a stronger than expected economic activity, and further widening of the output gap. the Committee anticipates further adjustments of the same magnitude in the next two meetings, if the scenario evolves as expected.” Brazilian CPI inflation has risen to a 14-month high of 4.87%, compared to 3.2% last April and a 3% target.

Ukraine’s inflation acceleration has been even steeper, climbing from 3.2% last April to 11.2% last month. Accordingly, the National Bank of Ukraine today raised its key interest rate to 13.5% from 13.0%, which had been maintained previously since a cut in July 2023. In addition to inflation that far exceeds the central bank target of 5%, tighter monetary policy was also deemed necessary in order to sustain the functionality of Ukraine’s foreign exchange market.

Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Central Bank of Brazil, National Bank of Ukraine

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