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Montevideo, March 19th 2024 - 08:47 UTC

 

 

High interest rates in Brazil for a long period, anticipates central bank

Friday, April 29th 2011 - 05:37 UTC
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The administration of President Dilma Rousseff is testing a blend of macro prudential tool The administration of President Dilma Rousseff is testing a blend of macro prudential tool

The Brazilian central bank said it will raise interest rates at a slower pace for a longer period than initially planned as the country’s inflation outlook worsens, according to the minutes of its April 19-20 meeting.

Policy makers raised the benchmark Selic rate by 25 basis points, to 12%, on April 20 after 50 basis-point increases at each of their two previous meetings this year. They said that a “substantial” part of their anti- inflationary effort has already been implemented given the recent rate increases and measures to curb credit.

The decision to slow the pace of interest rate increases was “associated to the decision to prolong the adjustment cycle,” the bank said. “The monetary policy committee understands, with unanimity, that given uncertainty over the persistence of recent inflationary pressures and the complexity of the global environment, the total adjustment of the reference interest rate should be, starting at this meeting, sufficiently prolonged,” according to the released minutes.

The administration of President Dilma Rousseff is relying on a mix of higher borrowing costs, measures to curb credit growth and spending cuts to bring the fastest inflation in 29 months back to policy makers’ 4.5% target in 2012. Consumer prices are likely to exceed the 6.5% upper limit of the target range in the third quarter, according to central bank estimates.

“The majority of the committee believes that a substantial anti-inflationary effort was already introduced in the economy over the past four months,” the central bank said.
 

Categories: Economy, Brazil.
Tags: Brazil.

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