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Brazil raised the benchmark rate to 10.5%: combating inflation the target

Thursday, January 16th 2014 - 09:17 UTC
Full article 4 comments
The Central bank decision was unanimous The Central bank decision was unanimous

Brazil's central bank raised its benchmark interest rate on Wednesday to 10.50% from 10%, a larger-than-expected hike aimed at curbing inflation in spite of a weak economy. The decision by the bank's monetary policy committee, Copom, was unanimous.

 The bank’s board, led by President Alexandre Tombini, voted 8-0 to raise the benchmark Selic by a half-point for a sixth straight meeting. From a record-low 7.25% in April, Brazil’s policy makers in 2013 lifted the Selic by 275 basis points.

Latin America’s biggest economy is facing accelerating inflation amid the worst two years of growth in more than a decade. Policy makers last year raised borrowing costs six straight times, including half-point increases at their last five meetings, in a bid to bolster business confidence and combat inflation exacerbated by a weaker Real and government spending.

“What’s clear is that policy makers are focused squarely on inflation,” Neil Shearing, chief emerging markets economist at Capital Economics Ltd., said by phone before today’s decision. “Growth is skewed too much toward consumption.”

Monthly inflation in December quickened the most since April 2003, as higher fuel costs helped prices jump 0.92%. Annual inflation in 2013 accelerated to 5.91% from 5.84% in 2012, thwarting pledges from Tombini that price increases would slow.

Last year’s inflation can be attributed to a weaker currency as well as pressures from the labor market and transportation industry, Tombini said in a Jan. 10 statement posted on the central bank website. The Real weakened 13% in 2013, the worst annual decline since 2008, on speculation the Federal Reserve would unwind monetary stimulus.

Likewise family and business sentiment has not improved in the face of persistent inflation. Consumer confidence as measured by the Fundacao Getulio Vargas fell in December to its lowest level since July, while industrial confidence was lower in December than when policy makers started raising rates in April.

Categories: Economy, Brazil.

Top Comments

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  • Jack Bauer

    The Brazilian Government , as well as the general media, always refer to the increase in the cost of living, as inflation. as if they were synonymous....anybody with half abrain should know that although they may go hand-in-hand, they are essentially different and have different origins. To put it simply, the government creates inflation by printing money (if the increase in national wealth does not follow, at the same pace), and an increase in cost living would be the result of your landlord doubling your rent, while your salary remains the's so simple, yet the government, always spending more than it receives in taxes, tries to fool everyone that THEY are not the cause of inflation....

    Jan 16th, 2014 - 05:24 pm 0
  • Brasileiro

    Inflation supply should not be fought with repression of consumption!
    Brazil must overcome the bad things. Desire to consume is not one of them.

    Poor not wide bone, even with a steak in sight.

    Jan 16th, 2014 - 08:44 pm 0
  • ChrisR

    Let's face it, nobody, that's NOBODY AT ALL knows WTF to do with the Brazilian economy.

    But wait! There is one entity who DOES know, can anybody guess his name?

    YES, it's MR. MARKET, he will sort it out, don't worry.

    You may not like what he does, but who cares, it's only Brazil?

    Jan 16th, 2014 - 09:29 pm 0
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