By Jeffrey T. Lewis
SÃO PAULO--Brazilian shares rose and the real strengthened
against the dollar Thursday after the country's central bank
surprised markets and raised its benchmark interest rate on
Wednesday night.
The Ibovespa stocks index rose 1.7% to 51904 points shortly
after the open. The real was trading at 2.4241 to the dollar at
10:45 a.m. São Paulo time, after closing at 2.4658 on
Wednesday.
The action will help convince markets the bank is serious about
getting price increases under control, and could help anchor
inflation expectations going forward, economists said. Brazil's
12-month inflation rate hit 6.75% in September, above the 6.5%
upper limit of the bank's target range for the indicator.
The bank's monetary-policy committee had been expected to leave
the Selic rate unchanged at 11%, as it had done at the three
previous meetings since raising it to that level in April. The bank
said in its statement that the outlook for inflation had worsened
and that the rate increase will improve the situation in 2015 and
2016.
Brazilian shares and the real have been hit in recent weeks by
the country's presidential election last Sunday.
Investors preferred the business-friendly candidate Aécio Neves
to President Dilma Rousseff, and ahead of the election shares fell
and the real weakened when polls were released showing the
president winning. Ms. Rousseff was re-elected, and shares fell
again, and the real hit its weakest point in almost 10 years the
day after the election.
Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com