Domestic bets drive Brazil hedge fund profits

- By Kris Devasabai
- 31 Oct 2011

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The Banco Centro do Brasil (BCB) gained a reputation for cautious and prudent monetary policy with five successive interest rate hikes in the first seven months of 2011. So investors were caught by surprise when the BCB slashed the benchmark Selic rate at the end of August by 50 basis points (bp). Few had expected the central bank to lower rates while inflation remained well above target levels.

The central bank cast the rate cut as a pre-emptive strike to protect domestic growth from a severe

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