After Another Cut Brazil Still Has Interests 3% Higher than Any Country

Brazilian monetary authorities hope the 11 will be the number that will do the trick. After ten consecutive cuts in the Selic – Brazil’s benchmark lending rate – without a visible improvement in the economy, the Brazilian Central Bank’s Monetary Policy Committee (Copom) has once again lowered the rate by 0.5% from 14.25% to 13.75%.

The cuts started in September of last year and since then interests have fallen a full 6%. At that first reduction in September the Selic lowered from 19.75% to 19.5%.

There was no surprise. The market was expecting this reduction, according to a report released earlier this week by Brazil’s Central Bank.

Despite the new cut, however, Brazil is still the world champion in high interest rates. Discounted the projected inflation for the next 12 months, the country will still have real overnight interbank rates of 9.3% a year.

Turkey, the second in the list of countries with the steepest interest rates, has a real rate of 6.2%. So, Brazil would need to cut more than 3% just to get rid of its number one position in the ranking.

Copom will still have a final meeting this year on November 28 when their members are expected to lower the Selic another 0.25%.

According to Getúlio Vargas Foundation’s (FGV) economist Salomão Quadros, a larger reduction in the Selic at this time, just 11 days before the presidential election might have been misinterpreted  putting the Central Bank’s reputation at risk.

"The Central Bank has already given proof of independence and is not going to run the risk of losing this reputation," said Quadros in a interview to Reuters.

As for inflation, experts are betting Brazil won’t exceed 3% this year and 4.2% in 2007. The official inflation target for 2006 is 4.5% with a tolerance margin of plus or minus two points.

Analysts also don’t fear any pressure on prices due to a heated economy. In the second quarter the country’s GDP was 1.2%. The Brazilian government has reduced its growth forecast from 4% to 3.5% for the year. But economists are expecting more like 3% or less.

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Your email address will not be published.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

Minister Promises Brazil Will Soon Become a Big Fish Exporter

Brazilian Minister of the Special Secretariat for Aquaculture and Fisheries, Altemir Gregolin, considered the ...

Brazil Lowers GDP Expectations from 4% to 3.12%

Brazil’s Gross Domestic Product (GDP), which represents the sum of wealth produced in the country, ...

Brazil’s Supreme Justice Wants Army in Rio to Clean Favelas for Olympics

Former president Fernando Henrique Cardoso's party, the PSDB (Party of the Brazilian Social Democracy), ...

Brazil Wants to Reduce Mother and Baby Mortality by 15%

To mark World Health Day, commemorated today, the World Health Organization (WHO) launched the ...

Brazil’s Embraer Sells Its First E-Jets to a Brazilian Airline

Brazilian airline BRA Transportes Aéreos signed a contract with Brazil's Embraer to buy 20 ...

When in Brazil, Don’t Do What Brazilians Do

As a young woman and habitual traveler to developing countries, I have always made ...

Brazilian Indians Gain Right to Live in Isolation

Of the 35 articles of the American Declaration of Indigenous Peoples’ Rights, three have ...

Bogota Models Sin Hambre Program on Brazil’s Zero Hunger

Luis Eduardo Garzon, mayor of Bogota, capital of Colombia, affirmed that the Administration of ...

Landless Movement in Brazil

To Brazil’s Landless Lula Is an Impostor and the Bankers’ Best Friend

As Brazil approaches the 10th anniversary of the April 17, 1996, Eldorado dos Carajás ...