BCB hikes 50 bps to 13.75% as expected

The Brazilian real ended the day virtually unchanged vs. the USD in the run-off from the COPOM meeting rate decision at USD-BRL 3.13. Late last night, the COPOM (Brazilian central bank) hiked the Selic rate by 50 bps to 13.75% as widely expected by market participants, says Commerzbank. 

The communiqué is virtually a carbon copy of the previous communiqué released during late April. While the statement is laconic (as usual) it still does not signal the end of the tightening cycle or even a shift in gears with respect to the 50 bps tightening doses we've witnessed in the previous meetings. 

The COPOM minutes next week become crucial in order to get more colour on COPOM's next actions. The high carry embedded in the BRL should remain as a supporting force in the absence of a negative global backdrop or a significant deviation from the ongoing fiscal austerity efforts, suggests Commerzbank.