Brazil stock traders recoil at Volpon’s rate call as real climbs

Denyse Godoy, Paula Sambo, and Filipe Pacheco – Bloomberg Business, 7/21/2015

Brazilian shares dropped to an almost four-month low on speculation borrowing costs at Latin America’s largest economy will increase further, curbing prospects for equities. The real advanced for the first time in four days.

The Ibovespa extended this month’s slump after central bank director Tony Volpon said policy makers should keep raising interest rates until the outlook for inflation reaches the government’s target. The benchmark stock gauge has tumbled 11 percent from this year’s peak on concern the decision to boost the Selic to a six-year high to tame consumer prices will deepen an economic contraction.

“The central bank will probably increase rates again next week in a trend that’s damaging the economy and prospects for companies,” Pedro Paulo Silveira, the chief economist at brokerage TOV Corretora, said by phone from Sao Paulo.

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