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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (3537)	3/23/2001 10:54:12 AM
From: John Pitera	Respond to of 33421

Brazil suprises the market with a 50 basis point increase yesterday: ---------FXfocus: We were very disappointed by the surprise 50 bp tightening by Brazil's central bank late yesterday. The central bank raised the benchmark overnight interest rate to 15.75%, marking the first tightening since March of 1999. Bank president Arminio Fraga, a man we have a great deal of respect for, suggested that the move just temporary, noting to a congressional group earlier this morning that the central bank would quickly revert to a policy of rate reductions. While the move was said to largely be a function of heightened inflation and Argentine concerns, we fail to see what kind of positive impact the rate cut can have. Investors are only going to become more risk averse if they feel as if the central bank is not doing enough to stimulate growth in the face of a global economic slowdown, while there is little a 50 bp tightening can do to mitigate the default and devaluation concerns in Argentina. While not the only factor, the rate hike did fit nicely with the nearly 2% drop in the real to its weakest level since its creation in July of 1994, as well as the 5.3% decline in the Bovespa Index.--------