(Bloomberg) -- Brazil's central bank is poised to separate itself even further from its emerging-market peers as it seeks to revive growth in Latin America's biggest economy.
While countries including Mexico, Turkey and Russia are either raising interest rates or keeping them unchanged, Brazil probably will slash benchmark borrowing costs for the second straight month on Wednesday, according to swaps traders and economists.
Ilan Goldfajn, who assumed the reins at Brazil's central bank in June, is taking advantage of slowing inflation to provide monetary stimulus for an economy mired in its longest recession in more than a century. Brazil was forced to boost its key lending rate to the highest in a decade last year amid a plunge in its currency and a political crisis that resulted in the impeachment of President Dilma Rousseff.
“Brazil had to hike much earlier and more aggressively last year, and now inflation is falling and they are comfortable cutting rates,” said Win Thin, the head of emerging markets at Brown Brothers Harriman & Co. in New York.
Brazil's annual inflation rate slowed to 7.87 percent in October from 10.67 percent a year ago, and analysts surveyed weekly by the central bank see it just slightly above the 4.5 percent target next year, at 4.93 percent.
After plunging in 2015, Brazil's real has jumped 17 percent in 2016 -- the biggest currency surge in the world.
The rebound has been fueled in part by optimism that President Michel Temer will push through legislation to restore Brazil's financial health. He's currently seeking Senate approval for a spending-cap bill aimed at helping shrink a massive budget deficit.
“Inflation is falling sharply after the impeachment, with a more market-friendly government and the prospects of fiscal reforms,” said Neil Shearing, the chief emerging-markets economist at Capital Economics in New York.
To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net.
To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Melinda Grenier at mgrenier1@bloomberg.net, Lester Pimentel
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