BRAZIL: Brazil’s central bank will announce any monetary policy change
after the US close Wednesday. The market would not be surprised to see a
50 bp hike in the Selic rate, currently at 8.75%. The Selic has held at
that level since July 2009. RBC Capital Market strategists note
consensus expects a rate hike, whether today or next month. “The
wildcard is timing – the market is divided whether they hike in March or
wait until April,” they say. RBCCM sees “very little benefit in the CB
waiting another month to commence a monetary tightening cycle.” In
addition, if the central bank hikes this month, it will elevate its
inflation fighting credibility, especially important with BCB Pres
Meirelles potentially soon stepping down. An earlier rate hike would
also “affirm” central bank independence (Govt pressuring CB to delay
hike as long as possible in a presidential election year). RBCCM does
not rule out a “compromise” 25 bp Selic hike at Wed’s meeting.