The latest round of US quantitative easing will create many problems for emerging countries and Brazil will take action to keep the Real from rising in value, Brazilian Finance Minister Guido Mantega said on Tuesday.
Speaking to journalists after a meeting in Paris with his French counterpart Pierre Moscovici, Mantega voiced concerns that further monetary stimulus would lower the value of the dollar and in turn hurt Brazilian competitiveness in export markets.
I don't think that the new monetary easing will solve many problems for the United States, but it will cause a lot of problems for emerging countries, Mantega told journalists.
Launching a third round of monetary easing, the US Federal Reserve pledged earlier this month to buy 40 billion dollars of mortgage-backed securities each month in a move aimed at bringing down interest rates.
Brazil has been one of the fiercest critics of US Federal Reserve easing and is fighting to keep capital from flowing from low-yielding dollar assets into the Brazilian currency Real with foreign exchange market interventions as part of what it calls a currency war.
Brazilian President last March said advanced economies were unleashing a “monetary tsunami” that adversely impacts on emerging markets’ currencies and trade balances.
We will continue to take measures to keep a devalued Real, he said, declining to say how low Brazil would keep the currency.
Moscovici said that he understood Brazil's concerns but added that currency tensions should be dealt with in international institutions and the Group of 20.
Mantega said that dollar weakness caused by the Fed's easing not only hurt Brazil's exports but that it reduced the value of the country's dollar reserves. He added that “if Washington wanted to help revive the US housing market it would be better to focus on fiscal rather than monetary policy”.