Brazil Central Bank Will Extend Interest Rate Hikes With Galipolo Fully in Charge

-- Gabriel Galipolo will chair his first interest rate decision as Brazil’s central bank governor on Wednesday with a clear, well-known mission: the board he now presides will raise the benchmark interest rate by a full percentage point for the second straight meeting. Lula called Galipolo a “gift” for Brazil in a video posted on social media last month that showed both men shaking hands and the leftist leader promising “total” independence to the new governor. In the next few months, Brazil’s rapidly worsening inflation outlook will likely “gain notoriety” in the board’s communication, giving it reason to turn more hawkish, said Carla Argenta, chief economist at CM Capital. “It matters for economic theory, and it would reinforce the board’s commitment to its inflation goal.” Skeptical Investors With the government studying lower import taxes to tame food inflation that’s hurting Lula’s popularity, investors will read carefully into the bank’s comments on public spending. “We expect them to stop criticizing fiscal policy as much.” Until now, policymakers have reiterated their next steps will be guided by the board’s “firm commitment” to tame price pressures.