Brazil ETFs: Central Bank Targets Inflation as Economy Expands

You knew it might happen eventually. Brazil’s economy has been white hot for such a sustained period of time that it’s now looking at tightening monetary policy. That has many investors wondering what it might mean for exchange traded funds (ETFs) that track the country’s development.

The Brazilian Central Bank may raise rates on Wednesday for the first time in a year and a half, but economists and analysts are divided over whether the Central Bank should hold off on changing the record low 8.75% rate until April instead, report Isabel Versiani and Raymond Colitt for Reuters.

Last year’s rate cuts helped Brazil’s economy return to growth after a six-month recession. However, inflation has also been present; local economists estimate Brazil’s inflation rate may increase to 5.03% this year. The Central Bank has an inflation target of 4.5%, plus or minus 2% this year.

Brazil’s economy added additional jobs for the second straight month in February, filling 209,425 more payroll positions, a record for the month, reports Isabel Versiani For Reuters. In January, 181,419 jobs were added, also a record for that month. [Reasons to Consider Brazil, and Ways to Play It.]

According to the Central Bank, Brazil’s economy is expected to expand 5.45% this year. Official government forecasts put Brazil’s growth at 6%, reports Hugh Bronstein for Reuters. That growth may be just enough to offset inflation. [Brazil ETF: Using Caution If There's a Bubble.]

For more information on Brazil, visit our Brazil category.

• EGS INDXX Brazil Infrastructure (NYSEArca: BRXX)
• iShares MSCI Brazil (NYSEArca: EWZ)

• Market Vectors Brazil Small Cap (NYSEArca: BRF)

Max Chen contributed to this article.