Brazil Cuts Interest Rates to Record Low 8.75%

Brazilian economy The BC, Brazil's Central Bank, lowered on Wednesday, July 22, the benchmark Selic rate by a half point to a record low 8.75%. The bank had cut the rate by at least a full point at all four previous policy meetings of 2009.

The action happens when performance of the Brazilian economy seems to be rebounding from its first recession in five years.

Brazilian domestic demand has been boosted by record low borrowing costs, lower taxes, an aggressive increase in government spending and generous support to Brazilian corporations with credit access difficulties.

"This level of the benchmark rate is consistent with a benign inflationary outlook, helping ensure the conversion of inflation toward the target, in a meaningful horizon, as well as a non-inflationary recovery of economic activity," said the Central bank release in support of the decision.

Annual inflation, as measured by Brazil's IPCA index, slowed to 4.8% in June, down from 5.2% in May and the lowest since March 2008. Policy makers last month reaffirmed that they seek to slow inflation to 4.5% by year-end.

Brazil's Central bank slashed the benchmark interest rate from a two-year high of 13.75% in December and injected about US$ 100 billion into money and currency markets to boost loans to companies and consumers amid the global credit crunch.

Brazil's total bank lending expanded to 1.26 trillion reais (US$ 662 billion) in May, a 20.5% increase over the same month a year ago. Loans as a percentage of GDP will expand to a record 45% by year-end, said last month Altamir Lopes, head of the Central bank's economic department, said last month.

Retail sales rose more than analysts expected in May, adding to evidence consumer demand has remained resilient. Sales increased 4% in May from the same month a year earlier according to a release earlier in the month from the statistics office.

Brazil's GDP contracted 0.8% in the first quarter of 2009 from the previous three months, after contracting a record 3.6% in the last quarter of 2008. The Central bank expects 2009 GDP growth of 0.8%, but the Organization of Economic Cooperation and Development anticipated a 4% expansion in a report released in mid July.

With growing signs of recovery and the massive liquidity injected to the economy, –as is happening in the US and UK–, there is also an underlying concern among economic agents that the Brazilian Central bank might be forced to begin raising the basic rate as early as the second quarter of 2010.

Mercopress

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

This Holiday Season, Get a Flu Shot and Give the Gift of Health to Your Family

Advertorial When you get a flu shot this holiday season, you’re not only decreasing ...

LatAm’s Ill Is Not Chavez But Misery and Lack of Education, Says Brazil’s Lula

Brazil's President, Luiz Inácio Lula da Silva said on Thursday, April 26, he believes ...

Kássio Adriano, suspect of killing German priest Wolfgang Johannes in Brazil

German Priest Killed in Brazil. Murderer Says Man Forced Him to Have Sex

German priest Wolfgang Johannes Hermann, 46, was knifed to death Tuesday afternoon, April 10, ...

Getting to the Bottom of Brazil’s Gerald Thomas

{mosimage}Arnold Schoenberg’s twelve-tone opera Moses und Aron, unjustly portrayed in the classical-music media as ...

Brazilian University Will Fill Half of Its Vacancies with African Students

Brazilian President, Luiz Inácio Lula da Silva, forwarded to the National Congress a bill ...

Brazil and Neighbors Look for Cultural Integration

The Mercosur is of decisive importance for the future of all the countries in ...

Brazilian Ecotoilet Makes Waste into Fertilizer or Mortar

Brazilian inventor Mário Benedito da Silva, from Porto Velho, in the Brazilian northern state ...

Europe Getting 190 Tons of Brazilian Berries

Farmers from the southernmost Brazilian state of Rio Grande do Sul who are members ...

Brazil Radio Station Set on Fire for 3rd Time. Mayor Main Suspect

Brazilian Nova Coari radio, in Amazonas state, in northern Brazil, was set on fire ...

Smiles Rewards Program Shared by Brazil’s Varig and Gol Passengers

Starting October 16 customers flying on both Varig and Gol airlines will be able ...