Rate hike bullish for Brazilian banks

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The Brazilian monetary policy board has voted once again to raise domestic interest rates another 25 basis points. The move was expected but its size was not. Although the COPOM board promised that its active policy adjustment will go on for a "prolonged" period of time, its bias is officially neutral now. And the 25-basis-point hike was smaller than recent 50-point moves, so the scale of the adjustments has shrunk significantly. Most traders are now expecting just one more little increase to take the benchmark Selic rate to 12.50%. After that, COPOM may be done. If so, the long period of uncomfortable strength for the real and real-based funds like BZF ( quote ) may finally be coming to an end: Another good sign: the statement was very similar to the one released after the April meeting. This means that the macro environment is holding up -- Brazil has not gone over a cliff and inflation has not gone out of control: "Considering the balance of risks to inflation, the still uncertain pace of the moderation of domestic activity, as well as the complexity that surrounds the international environment, the Copom understands that the implementation of adjustments of monetary conditions for a sufficiently prolonged period continues to be the most appropriate strategy to guarantee the convergence of inflation to the target in 2012." This is going to be good for the banks and other rate-sensitive stocks -- Brazil-focused car makers like FIATY ( quote ) and maybe even homebuilders like GFA ( quote ): And in general, EWZ ( quote ) could use the relief:



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



This article appears in: Investing , International , Stocks

Referenced Stocks: BZF , EWZ , FIATY , GFA

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