Brazilian Real Jumps After Central Bank Surprises

The Brazilian real jumped today following yesterday’s surprise interest rate hike from Brazil’s central bank. Such decision resulted in speculations that additional rate increases may happen in the future.
The Central Bank of Brazil made a huge surprise to market participants yesterday, raising its main interest rate by 25 basis points to 11.25 percent, while no change was expected. The decision was not unanimous as three voting members voted against it, but the rest five members voted in favor of such action. The bank explained its move:

For the Committee, since its last meeting, among other factors, the intensification of relative prices´ adjustments in the economy has made the balance of risks for inflation less favorable. In light of that, the Committee considered opportune to adjust the monetary conditions in order to guarantee, at a lower cost, the prevalence of a more benign scenario for inflation in 2015 and 2016.

USD/BRL fell from 2.4652 to 2.4026 as of 16:30 GMT today.

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