Brazil’s real plunges as central bank chief softens stance on rate hike

The Brazilian real suffered significant losses on Tuesday after central bank governor Roberto Campos Neto tempered expectations of an imminent interest rate hike. In an interview with O Globo newspaper, Campos Neto indicated that while a rate increase remains a possibility, it is less likely than previously anticipated.

Market participants had been pricing in a potential rate hike as early as September, but Campos Neto’s comments cast doubt on this assumption. His emphasis on the need for caution and a broader economic assessment before making a decision contributed to the real’s decline.

The Brazilian currency weakened by as much as 0.9 per cent to around 5.45 per dollar, the worst performance among other Latin American currencies. Analysts interpreted Campos Neto’s statements as “less hawkish” than previous central bank communications, said said Marcelo Matsmoto, treasury director at Mizuho Bank.

“I understand that he is signaling that the interest rate hike is far from being a consensus at the monetary committee,” Matsmoto noted, adding that this was “casting doubts” on the most aggressive market bets for rate increases.

Attribution: Bloomberg