Brazil's benchmark stock index, the Ibovespa, fell 0.51% on Wednesday (16), with Petrobras shares among the biggest drags on the index, according to InfoMoney. In practical terms, a 1,000-real portfolio tracking the index lost about 5 reais on the day. The decline followed the global market reaction to the Federal Reserve, the US central bank, raising interest rates and signaling more tightening ahead.

The commercial dollar closed nearly flat at R$ 5.15, InfoMoney reported. For consumers, every US$ 100, the pre-tax price of an imported pair of sneakers, costs about 515 reais. The US currency gained ground against most currencies after the Fed decision, but the Brazilian real held steady as traders waited on the country's own central bank.

Why the market fell

In New York, the Dow Jones fell 1.21%, the S&P 500 lost 0.44% and the Nasdaq was virtually unchanged. Energy was the worst performing sector after Brent crude dropped 2.69% to US$ 105.83 a barrel on reports that Saudi Arabia would offer extra oil cargoes. Even so, oil is up more than 20% in about two and a half weeks because of the war in the Middle East, a rise that already weighs on pump prices.

How it works: the Fed sets the benchmark interest rate for the United States, the reference for credit in the world's largest economy. When the Fed raises rates, US government bonds pay more and attract foreign money, which strengthens the dollar against currencies such as the real, as G1 explains. Higher US rates also pressure Brazil to keep its own policy rate, the Selic, elevated to avoid losing investors.

Fed hikes, Brazil's Copom cuts

The Fed raised its rate by 0.25 percentage points to a range of 3.75% to 4% a year, the first increase since July 2023, in a unanimous vote. Most committee members project at least one more 0.25 point hike this year, according to G1, while US consumer inflation ended August at 3.4% over 12 months, well above the bank's 2% target. "The fact is that inflation is too high and has been for too long," Fed Chair Kevin Warsh said at a press conference.

In Brazil, the session ended with the market waiting on the Copom, the central bank committee that sets the Selic, the benchmark rate that shapes the cost of car loans and credit card debt. Traders bet on a cut from 14% to 13.75% a year, and the committee confirmed that move after the closing bell: it was the fifth straight reduction, G1 reported. Credit remains expensive: on a 10,000-real debt, the old 14% rate meant roughly 1,400 reais in interest per year, and Brazil's real interest rate, at 8.45%, is still the world's highest, according to a MoneYou survey.