MercoPress. South Atlantic News Agency

Brazil’s Mantega becomes supporter of US stimulus and praises Fed’ last decision

“Volatility could be dissipating and this will help improve the business climate” said the Brazilian minister

Brazilian Finance Minister Guido Mantega, on Wednesday cheered the Federal Reserve's decision to leave stimulus unchanged, saying it may signal an end to market turmoil. Mantega, who gained international fame for using the term “currency wars” to describe rich nations’ efforts to lift exports by weakening their currencies, said a gradual stimulus withdrawal may boost Latin America's largest economy.

“Volatility could be dissipating and this will help improve the business climate,” said Mantega, who has accused the Fed of triggering recent market volatility with “confusing” guidance.

The spectre of a cut in the Fed's bond-buying program has driven investors out of emerging-market countries en masse, threatening the once high-flying economies as the value of local assets plunged to multi-year lows.

Latin American currencies, stocks and bonds quickly soared on Wednesday after the US central bank surprisingly decided to stick to the stimulus plan for now, fearing higher borrowing costs could undermine the country's recovery.

Brazil's real jumped nearly 3 percent to close at 2.1935 per dollar, its strongest since late June.

”The Fed is signalling a soft landing ... that it will cut (stimulus) more slowly,” Mantega said.

He said a slightly stronger real could prop up local economic activity, ease inflationary pressures and reduce a widening gap in the country's external accounts.