Market roundup: Brazilian markets rattled by the Fed

Fed chair Jerome Powell. Photo: Federal Reserve

🔔 The dashboard: Brazil’s benchmark stock index Ibovespa gained 0.73 percent this week. Meanwhile, the Brazilian Real gained 1.87 percent against the U.S. Dollar this week.

Biggest gains: Americanas (retail): +38.91 percent.
Biggest drops: IRB Brasil (insurance): -10.45 percent.

U.S. moves, rather than the presidential election, are unsettling Brazilian markets

U.S. Federal Reserve chair Jerome Powell today delivered his long-awaited speech at Jackson Hole, the Kansas City Fed’s annual economic symposium. Mr. Powell avoided painting the Fed into a corner by stating the precise extent to which the central bank will raise interest rates at its next meeting in September.

Still, the message was that higher sustained inflation will not be allowed to take root, and that this will not be a painless process – something that echoed in Brazilian markets.

In his works. “We will keep [rates high] until we are confident the job [to curtail inflation] is done,” Mr. Powell said in the final words of his speech.

Why it matters. The most significant adverse effect of further interest rate hikes in the U.S. would be Brazil needing to keep its benchmark rate higher for longer next year, making debt more expensive for families and companies, reducing credit availability, and thus taming growth.

State of...

Fabiane Ziolla Menezes and Ana Ferraz

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.