Brazil set to hike rates as inflation risks rise

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(Reuters) – Brazil’s central bank was poised to maintain its aggressive pace of interest rate hikes on Wednesday after a steep cut in fiscal savings targets weakened the real currency and stirred doubts about the government’s commitment to help contain price increases.

Forty-two out of 55 analysts surveyed by Reuters last week expect the central bank to raise its benchmark Selic rate by 50 basis points for the sixth straight time to 14.25 percent. The remainder forecast a hike of 25 basis points.

The Brazilian real has slid nearly 4 percent against the U.S. dollar to its weakest in 12 years since Brazil unveiled less ambitious fiscal targets last Wednesday. The sharp depreciation has intensified inflationary pressures by making imports more expensive. The real firmed 0.2 percent early on Wednesday.

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