The central bank of Brazil (BCB) will meet this week. Market consensus point to an increase in the main policy rate to 7.75%, an 150bps hike. According to analysts from TD Securities there is some risk of an even more aggressive move. 

Key Quotes: 

“We expect the BCB to make a more aggressive policy rate adjustment by hiking rates by 150bps, aimed at containing inflation expectations and stabilizing BRL. There is some risk of an even more aggressive move in our view.”

“The risk to BRL is skewed to the downside. We believe that a 150bp rate hike, with a commitment of another equivalent hike at the December meeting, will be required to bolster BRL. Anything less risks a resumption of BRL selling.”

“The rates market has priced-in an assumption of an aggressive shift in the BCB's stance, leaving a terminal rate near 13.00% by late 2022.”