• Categories
  • Archives

Brazil Keeps Key Interest at 8.75% and Cuts Swap Line with US

Real currency from BrazilBrazil’s Copom (the Monetary Policy Committee at the Central Bank) for the sixth consecutive month, has kept the country’s basic interest rate at 8,75%. The rate is known as the Selic and it is technically the nominal interest rate.

The next meeting of the Copom is scheduled for mid March and no changes in the Selic are expected before then.

However, the real interest rate in Brazil, which is the Selic after projected inflation for the next 12 months is discounted, is estimated at 4%, which is the highest rate among the 40 developed and developing nations used by UpTrend Economic Consultants for its world ranking.

In the latest UpTrend ranking of countries by real interest rates Brazil is once again back on top of the list with the highest real interest rate in the world.

Here’s why (hint: the Brazilian economy is not to blame!): for the last nine months China had the dubious distinction of being at the top of the list, but due to a recent spike in Chinese inflation Brazil has now risen to the top followed closely by Indonesia.

Fed’s Swap Line

In the dark depths of the international financial crisis in October 2008, the Federal Reserve of the United States extended temporary reciprocal currency arrangements, known as swap lines, worth US$ 30 billion to Brazil along with Mexico, Korea and Singapore “… four large and systemically important economies,” in the words of the Fed. 

In practical terms this was not a loan, but a precautionary measure designed to help improve liquidity conditions and “mitigate the spread of difficulties in obtaining US dollar funding.”

In other words, the objective was to ensure that if the Brazilian economy needed dollars they could be made available through a currency swap (dollar and real).

This swap line arrangement is scheduled to terminate on February 1st. The Brazilian Central Bank, after consulting with monetary authorities in other countries, has decided not to renew it.

Brazil did not need the dollars. In a note, the Central Bank explained that as international financial markets are now operating satisfactorily, arrangements to deal with liquidity restrictions or problems on the Brazilian exchange rate market “…are no longer necessary.”

ABr

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Your email address will not be published.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

Brazil's Terena Indian Rogério Ferreira da Silva

Brazilian, Indian, Ph.D. in Agronomy

On February 22, Brazilian Rogério Ferreira da Silva presented his doctorate thesis in agronomy. ...

After Hospital Visit Brazil’s Ronaldo Is Back in Training

Brazilian football player Ronaldo went through a series of medical tests and doctors found ...

Brazil Sends Over 1,000 Soldiers to Favela to Retrieve Stolen Rifles

Brazilian security forces, backed by tanks and helicopters, have carried out an operation to ...

Brazilian Investments Totalled 110 Billion in 2004

The investment projects announced by companies in Brazil in the second half of last ...

Brazil Wants to Export Eco-Electric Shower

Brazil's KL Telecom, a company located in Santa Rita do Sapucaí­, in the Brazilian ...

In Brazil, Left Gives a Show on How to Lose Power

With minds concentrated firmly on the race for the Oval office this weekend (though ...

Kofi Annan Calls Brazil’s Lula for Support

The Secretary-General of the United Nations (UN), Kofi Annan, asked Brazilian President Luiz Inácio ...

Uncontacted Peruvian Indians Flee into Brazil to Escape Loggers

A large group of uncontacted Indians has appeared in a remote village in the ...

Industry Output Drop in Brazil Fuels Hopes Interests Will Fall

Latin American stocks were mixed to lower, with Brazilian stocks falling amid concerns about ...

Meet Ms. Vasconcelos, a Brazilian Fashion Broker

The Brazilian businesswoman from Minas Gerais, a state in the southeastern region of the ...