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Brazil central bank says alternative paths to anchor inflation would require sharp rate shifts

BY Reuters | ECONOMIC | 07:22 AM EDT

BRASILIA, June 23 (Reuters) - Brazil's central bank said on Tuesday that alternative interest rate paths to ensure inflation converges to its 3% target by the end of 2027 would require "abrupt changes in direction and of large magnitude in the Selic rate, followed by several quarters of inflation below the target."

In the minutes of its latest rate decision, after cutting rates by 25 basis points for a third straight meeting to 14.25%, policymakers said that, for now, interest rate paths closer to those in its weekly Focus survey and market pricing are more appropriate, "as they avoid inducing excessive volatility in financial asset prices and macroeconomic aggregates." (Reporting by Marcela Ayres; Editing by Andrew Heavens)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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