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Brazil central bank admits difficulties in taming stubbornly high inflation

Thursday, April 4th 2013 - 07:45 UTC
Full article 11 comments
Tombini said a rate hike is possible if needed Tombini said a rate hike is possible if needed

Brazil’s Central Bank will keep a close eye on the economy to see if there is a need for any action to tame stubbornly high inflation, the bank's chief Alexandre Tombini said in a presentation to the Senate's economic affairs committee

“The Central Bank is monitoring the evolution of the economic scenario to evaluate the need for other measures to battle inflation,” Tombini said.

He said the Central Bank will analyze upcoming inflation data for March to decide on future steps.

Annual inflation in the month to mid-March climbed to 6.43%, dangerously close to the ceiling of the official target range of 6.5%. Economists have raised their forecasts for inflation, suggesting policymakers will need to raise interest rates to keep price expectations under control.

Economists disagree, however, on when the bank will hike rates and point to upcoming inflation data as key to determining the timing.

Market traders widely expect the central bank to keep its benchmark Selic rate at the current record lows of 7.25% when it next meets on April 17 to avoid disrupting a still timid economic recovery.

Recent economic indicators show the recovery in Brazil’s economy remains uneven despite a barrage of government stimulus measures that include tax breaks, lower energy costs and billions of dollars in cheap credit.

Tombini denied the bank is under pressure from President Dilma Rousseff's government to make economic growth a priority and keep interest rates low even if inflation remains high.

He said the bank has already modified monetary policy by explicitly communicating its worries about high inflation and signalling a rate hike is possible if needed. He said the aim of that change in message is to have an impact on inflation expectations.

The Central Bank has raised its inflation forecasts to more than 5% for 2013 and 2014, well above the 4.5% centre of the target range which has a tolerance of plus or minus two percentage points.

Categories: Economy, Politics, Brazil.

Top Comments

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  • Britworker

    Hmmm, I can see some mortgages becoming unaffordable if interest rates go up, now where has that happened before?

    Apr 04th, 2013 - 11:32 am 0
  • yankeeboy

    Gee you don't think this inflation is coming from the huge subsidies Dilma is doling out to the poor do you?
    Do these idiots never see the connection?
    They're repeating the same story as they have over the last few generations, up, down, up, down, up, down...when will they ever learn?

    Apr 04th, 2013 - 11:53 am 0
  • Brazilian

    2. Inflation comes from low unemployment and high credit, it has nothing to do with subsidies for the poor. Are you an idiot? Look at your own economy, you have nothing to say about Brazil. Repeating the same story of last generations? I suggest you buy a few history books and inform yourself, that is, if you're actually capable of complex reading comprehension (which I doubt). Good luck finding a job. Good luck going to a movie theater without getting shot. Good luck sending your kids to school without them being gunned down by another crazy north-american high on medications. Good luck with the next terrorist attacks on the US, because sure enough they will come as a product of your foreign policy. Your contry has enough problems to worry about, and Brazil has given a slap to the face of the US for trying to meddle in it's internal affairs. How's that FTAA working out? Oh right, you got slaped in the face by Brazil.

    Apr 05th, 2013 - 03:40 pm 0
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