Brazil’s Interest Rates Are Still 6 Times Higher Than the US’s

The Brazilian Central Bank cut the benchmark Selic lending rate 25 points to 19.5% from a two-year high, 19.75%. The rate reduction, the first in 17 months, follows nine rate increases since September 2004 that stemmed a surge in inflation.

The Brazilian government is forecasting a 3.4% growth in 2005 from a several years high of 4.9% in 2004.


Analysts said that a decline in the annual inflation rate to a 15 month low of 6% allowed the Central Bank to begin reducing the benchmark rate.


“Inflation guided the Central bank during the cycle of interest-rate increases, so they should stick to the same reasoning now to guide rates down”, said Adhemar Rodrigues from Santa Cruz Finance in São Paulo.


Brazil’s 19.5% benchmark lending rate is more than double the 9.5% benchmark rate in Mexico and the 3.5% rate in the U.S. Brazil will lower its benchmark rate to 18% by yearend, according to a central bank survey of about 100 economists that was released on September 12.


“We believe that the bank had enough room for a bigger rate cut,” said Armando Monteiro Neto, president of the National Industry Confederation, the country’s biggest business guild.
“It was a very timid and very conservative decision,” he added.


The interest rate gap between Brazil and other countries has lured money to the country’s fixed-income market, sparking a rally in the currency. Brazil’s real has gained 25% in the past 12 months, helping slow inflation by reducing the cost of imports.


The average Brazilian corporate borrowing rate was 33% in July, which pushes many companies to increase sales abroad to make them eligible to receive subsidized export-project loans from the state development bank, said Emilio Garofalo, a former central bank director.


“Industrial production didn’t slow more because exporting remains very attractive due to lower interest rates and demand from the international market,” said Garofalo, who now works as an economic consultant out of Sao Paulo.


Brazilian economic growth picked up in the second quarter to 3.9% from the 2.9% of the first quarter.


The Brazilian Central bank has targeted 5.1% inflation this year and 4.5% in 2006.


This article appeared originally in Mercopress – www.mercopress.com.

Tags:

Ads

You May Also Like

2016 Olympics: Athletes of the World, Pack Your Bags, We’re Flying to Rio

At the end, the charm of president Barack Obama, his wife Michelle and that ...

RAPIDINHAS

Hollywood Bound By Brazzil Magazine

Brazil Cuts Key Interest Rate by 1%. Workers Wanted 2 %

The Brazilian Central Bank (BC) reduced its benchmark SELIC interest rate a full point ...

Brazil’s Lula Calls Blair and Again Proposes Summit of G-8 and G-20

Brazilian President Luiz Inácio Lula da Silva, on Tuesday, January 31, telephoned the Prime ...

Brazil’s Trade Balance Surplus One Third Bigger than Last Year’s

Brazil's trade balance surplus (exports minus imports) in the second week of May 2009 ...

Middle East Woos Brazilian Entrepreneurs

The negotiations between entrepreneurs from Brazil and importers and exporters from Iraq, Jordan, Lebanon, ...

Brazil’s Ex Vice President, Self-Made Millionaire José Alencar, Dies at 79

Brazil’s former vice president, José Alencar, died in the Sírio-Libanês Hospital in São Paulo ...

Brazil Woos Germany with Biofuel and Tourism

The 23rd Brazil-Germany Business Encounter and the 32nd Meeting of the Brazil-Germany Economic Cooperation ...

Chief of Staff Resignation Makes Brazil Go Shopping

Latin American shares powered higher, lead by gains from both Brazil and Mexico. Brazilian ...

Brazil Presents Samba de Roda as Mankind’s Heritage

The National Non-material Heritage Program, launched yesterday by Brazil’s President Luiz Inácio Lula da ...