Brazil’s weakening domestic market and a slowing global economy are weighing on Brazil-related exchange traded funds, but Brazil’s central bank is taking action to help alleviate the stress.
The iShares MSCI Brazil Index Fund (NYSEArca: EWZ) is down about 20% over the past three months but has rebounded in October.
Brazil’s central bank reduced its key interest rate to 11.50% Wednesday in an attempt to help the ailing economy, despite ongoing concerns about the high inflation rate, report Tiago Pariz and Asher Levine for Reuters.
Loose monetary policies make a country’s currency less attractive to foreign investors. The WisdomTree Dreyfus Brazilian Real Fund (NYSEArca: BZF) is off about 12% for the trailing three months. [Assessing Risk in Brazilian ETFs]
Central bank chief Alexandre Tombini believes that the slowdown in Brazil and the global economy will help keep a lid on inflation. Some economists believe the central bank’s decisions are prudent in light of the worsening international outlook.
Tombini hopes inflation will recede back to 4.5% on the global headwinds. Meanwhile, Brazil’s inflation rate is currently at 7.31%, above the 6.5% target ceiling.