Brazil’s central bank is aggressively combating inflationary pressures, bolstering country-specific and real currency exchange traded funds.
Inflation levels have slowed for the third consecutive month in September, with the benchmark IPCA index up 5.86% year-over-year, reports David Biller for Bloomberg.
The central bank raised its benchmark Selic rate to 9% in August, the third straight 50 basis point increase, and is expected to raise the benchmark rate another 50 basis points in its monetary policy meeting Wednesday.
Brazil’s central bank also introduced a $60 billion program to support the Brazilian real currency and help Forex fluctuations from stoking inflation. The real has appreciated 10.4% since the program was introduced on Aug. 22. The WisdomTree Brazilian Real Fund (NYSEArca: BZF) has gained 11.5% since then.
Meanwhile, the Brazilian government has cut back on stimulus measures, including consumer tax breaks.
Bank President Alexandre Tombini stated that the programs have shown a positive result. The bank now has an inflation target of 4.5%, plus or minus two percentage points. Economists predict inflation will be 5.8% this year and 5.95% in 2014.
The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) has increased 15.3% since the August low. [Brazil ETFs Rallying on Huge Trading Volume]
For more information on Brazil, visit our Brazil category.
Max Chen contributed to this article.