• Categories
  • Archives

Brazil Cuts Key Rate to Record Low to Jumpstart Economy

Mantega, Brazil's Finance Minister The Brazilian central bank on Wednesday slashed its interest rate for the 10th time since August of last year, to a record low of 7.25%, in a bid to stimulate the sluggish economy.

The bank’s monetary policy committee Copom announced the quarter-point reduction after the market closed and said the (divided) decision was made given inflationary risks, the domestic economy and global economic uncertainty.

Late last month, the central bank lowered its forecast for Brazil’s economic growth in 2012 from 2.5% to 1.6%, but is counting on that number to pick up next year.

The government of President Dilma Rousseff which has launched a series of stimulus measures this year is banking on 2% GDP growth this year — down from an earlier forecast of 3%, while market analysts are forecasting a 1.5% rise.

The world’s sixth largest economy showed clear signs of a slowdown in the first half of this year, expanding only 0.6% compared with the previous quarter. The Brazilian economy grew a paltry 2.7% last year, down from a strong 7.5% in 2010.

The central bank launched its rate cut strategy in August 2011, when the interest rate stood at a historic high of 12.5% and inflation, at 7.2%, exceeded the government’s target.

Brazil’s inflation rate over the past 12 months stands at 5.28%, driven by rising food prices. Analysts expect Brazil to close the year with an inflation rate of 5.2%, lower than the 6.5% registered in 2011 but higher than the official target of 4.5%.

The official release says that “Copom decided to reduce the Selic rate to 7.25% p.a., without a bias, by five votes in favor and 3 votes for keeping the Selic rate at 7.50% p.a.

“Considering the balance of risks for inflation, the recovery of domestic activity and the complexity surrounding the global environment, the committee understands that the stability of monetary conditions for a sufficiently prolonged period of time is the most adequate strategy to guarantee the convergence of inflation to target, even if not in a linear fashion.

“Voting in favor of the reduction in the Selic rate to 7.25% p.a. are the following board members: President Alexandre Antonio Tombini, Aldo Luiz Mendes, Altamir Lopes, Luiz Awazu Pereira da Silva and Luiz Edson Feltrim.

“Voting for keeping the Selic rate at 7.50% p.a. are the following board members: Anthero de Moraes Meirelles, Carlos Hamilton Vasconcelos Araújo and Sidnei Correa Marques.”

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

Market in Brazil not Bullish for 2005

Brazilian financial consultants and market analysts interviewed last week by the Brazil’s Central Bank ...

It’s 2008. The US Has Dragged the World into a Depression.

Today, Brazil and most South American countries in general are disconnecting from the United ...

In Brazil Oil Production Goes Up 5% While Exxon Finds Oil Offshore

Brazil's Petrobras, the government-controlled oil and gas multinational produced an average of 2.4 million ...

Four Years and Counting

Public approval of the Real plan is not unanimous anymore. Complaints range from the ...

Brazil’s Rosy Economy Gives Lula Big Boost in Popularity

Riding on Brazil's strong economy, which has helped boost wages and jobs, support for ...

Brazil to Break AIDS Drugs Patent? ‘All Bluff.’

Brazil’s executive president of the Pharmaceutical Industry Association (Interfarma), Gabriel Tannus, says that Brazil ...

Don’t Blame Brazil for the World’s Food Crisis!

U.S.-Brazil tension, a relatively recent development, resurfaced during the UN World Food Summit in ...

Brazil Goes to the Polls and Gives President Lula Several Victories

Brazilians voting in mayoral and municipal elections have given the president's Workers' party wins ...

Brazil’s Gol and Varig Merge Operations and Enhance In-Flight Service

Brazilian airline Gol has announced that it has received ANAC (Brazil's National Civil Aviation ...

Brazilian President Blames US Financial Crisis on Obama’s Lack of Political Will

For Dilma Rousseff, the president of Brazil, the financial crisis in the United States, ...