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Brazilian Rate Hike

|Includes: iShares MSCI Brazil Capped ETF (EWZ)

As expected, Brazil's central bank increased the country's policy rate to 10.75%.  This comes as inflationary pressures have risen in recent months.  Consumer price inflation was reported at 5.91% in December.  The central bank's inflation target is 4.5%.  Below is a chart of Brazilian consumer price inflation and the target federal funds rate over the past two years, through December 2010.

 

Source: Banco Central do Brasil

 

Just to check in on Brazilian equities, below is a chart of the Brazilian ETF EWZ.

 

Source: Stockcharts.com

 

Inflationary pressures should continue to be a headwind for Brazilian companies, along with China's own tightening of monetary policy.

Disclosure: No position



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.