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Fearing Inflation Brazil Gets Ready to Hike Interest Rates

Brazil's Central Bank chairman Henrique Meirelles The president of Brazil's Central Bank, Henrique de Campos Meirelles said that his bank is ready to cap pressure on prices with the purpose of keeping inflation under control even when this could impact on the strong economic growth of the economy.

In April, the Brazilian Central Bank rose the basic Selic rate 50 basis points to 11.75%, higher than what was expected. Inflation in Brazil is in the range of 5%.

Many analysts are convinced the bank will again hike rates particularly since Brazil was recognized by risk rating agencies -for its orthodox policies – with investment grade which will attract even more capital to the country from overseas.

"It's important the Central Bank adopts measures with sufficient anticipation so Brazil can continue along the path of sustained healthy growth with low inflation," said Meirelles during a hearing before the Brazilian senate's Economic Affairs Committee.

Meirelles also cautioned there was a risk that wholesale (producers) inflation could extend to consumer prices during the coming months. He also admitted that core inflation was showing signs of acceleration.

The Brazilian economy expanded 5.4% in 2007 the highest in the last three years following a long policy of interest rate cuts.

But the consumer prices index showed it was picking up speed on consumers' greater spending who fear an interest rate increase to help contain inflation.

Mercopress

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  • Show Comments (11)

  • João da Silva

    dnbaiacu
    [quote]All I can say is WOOOOOOW. Slowly[/quote]

    What really surprised me today was to read that the Argentines are rushing in to convert their savings in Pesos into U$. Their government is injecting U$ into market to keep the exchange rate stable,but nobody knows for how long.It would be interesting to receive comments from Ch.c on this issue.

  • dnbaiacu

    Joao
    All I can say is WOOOOOOW. Slowly

  • João da Silva

    dnbaiacu
    [quote]CEO’s run to Switzerland with all the money. Where all the “blood money” the world over goes.
    Ch.c continues to make money …. [/quote]

    No, the CEOÀ‚´s do not have to run to Switzerland. Ch.c is building Buddhist monasteries in Vietnam to give asylum to all of them and charge the same price as they do for Chalets in Switzerland 😉

    [quote]That’s if the “Central Bank” leaves any money in Brazil.
    Maybe I am just stupid.. But this will be one to watch [/quote]

    It is interesting that you made this comment.This morning I read the news that the central bank president Henrique Meirelles will be leaving the bank in September 2009, when his term of office expires. As you have said many times, this year is going to be one to watch and remember about in posterity.

  • dnbaiacu

    Economic Ignoramus “gets it”
    Banco Do Brasil sets up shop in the Middle East.
    Big companies invest in the Middle East.
    Central Bank charges companies high rates for loans.
    Quick profits for all involved. (??????)
    Middle East goes haywire.
    CEO’s run to Switzerland with all the money. Where all the “blood money” the world over goes.
    Ch.c continues to make money ….
    I hope everyone has their timing right. 😉
    [quote], lots of Brazilians are going to be thankful for his penalizing, but at the same time improving their lives.[/quote]
    That’s if the “Central Bank” leaves any money in Brazil.
    Maybe I am just stupid.. But this will be one to watch
    [quote]And guess who are the largest (in quantity) individuals real estate investors HERE ?
    The Brits.
    [/quote]
    Everyone is just going where they are hiding their money. Doesn’t take a rocket scientist to figure that out.
    And what’s up with the “British Pound” ? Is it still higher than the Euro? ( I will check after I’m done with this. But I think I know the answer)
    The Swiss hide blood money. The Brits control blood money(since the U.S was colonized) They are partners.
    What Brazils’ doing?…….( the ones at the very top
    I don’t have a clue
    But then again they could be pricing “chalets” in the Swiss Alps also 😀

  • ..

    [quote]And the idiot who applaude Meireles should better think twice :
    Who at the end is Meireles PENALIZING ? [/quote]

    It is so apparent that this commentator refers to me,calling me an idiot.I have thought once,twice and a hundred times.My final conclusion:Dr. Meirelles is doing a wonderful job and when he finishes his mandate as the President of our Central Bank, lots of Brazilians are going to be thankful for his penalizing, but at the same time improving their lives.Of course, the commentator will be very happy too for Meirrelles having given him a great opportunity to thicken his purse at the cost of the hard working proletariat that makes R$415/month.

    Regardless, the commentator is most welcome to invest in our Government Bonds 😉

  • João da Silva

    Ch.c
    [quote]Ohhhhh and what about airlines in Brazil such as GOL or TAM ???????
    – GOL…stock price down from BRL 84.- TOP to 26.- now. Or DOWN 70 %
    – TAM…stock price down from BRL 75.- TOP to 36.- now. Or DOWN 50 %
    [/quote]

    I am happy to inform you that our beloved Prez pays lots of attention to your legitimate complaints and tries to solve them.

    I heard on the TV that he wants to create a State owned Airline. My congratulations to you for advising him on this issue 😉

    Any comment on this?

  • João da Silva

    [quote]A very wise decision by our Central Bank President.This way, we will attract “Opportunistic Investors” from all over the world, not just from Switzerland.

    Keep up your good work, Dr. Meirelles .You are doing a great job.[/quote]

    LOL, you for real, Cumpenheiro?

  • ch.c.

    Continued……
    I went out of my BRL Government Long term bonds ONLY ! But also sold ALL BRK currency proceeds of sales to repay my bank loan, since the investments were :
    A) on leverage of 3 to 1
    B) the leverage was borrowed in Swiss currency
    C) Thus cashing in a profit on bond prices and a profit on currency.

    BUT….went in….a carry trade : long the BRL, against (short) the CHF…in the forex market.
    Using the same 3 to 1 leverage. Low leverage in forex trades.

    If you dont know what a carry trade is……you better should !

    I never said the BRL currency could go down sharply. But Long term bond prices could.
    PLUS….a currency carry trade is far more liquid to enter/exit than trading the bonds of a developing nation.

    Now I have only a currency risk….no longer a currency AND a bond price risk !

    And remember, in developed or emerging nations, a change in trend in the government rates is 98 % the start of a serial change….in the same direction. But it doesnt mean the currency will collapse, especially when idiots are offering the WORLD highest interest rates…..after inflation.

    And the idiot who applaude Meireles should better think twice :
    Who at the end is Meireles PENALIZING ?
    The Brazilian society, the Brazilian entrepreneurs.
    Dont Brazilian borrowers have to further triple, quadruple or even more than quintuple for overdrafts….the already World Highest Government Rate….after inflation ?????

    If you enjoy paying a minimum of 30 % for your bank borrowings, but usually more around 4 %…..PER MONTH, and as high as 120 % for overdrafts……you are truiy the world deepest and addicted….MASOCHISTS !
    Especially when your inflation was or is anywhere between 4 to 6 % !!!!!!!

  • ch.c.

    ??????
    the idiots at BBC should better check out their own dirts first…and look at their British Airways stock price that went down….by nearly 60 % in the last 2 years.
    You can as well look at Ryanair, a British discount airline, doing more than poorly.

    In the EU, to a lower extend than Brtish Airways ( stock prices down only by 40 % or so) the same for Air France and Lufthansa stock prices.

    Ohhhhh and the best of the best : ALITALIA…….losing US$ 1,5 million….PER DAY !!!!!
    Yesssss…PER DAY !

    Due to expanding travels ????

    Doubtful ! sorry

    Ohhhhh and what about airlines in Brazil such as GOL or TAM ???????
    – GOL…stock price down from BRL 84.- TOP to 26.- now. Or DOWN 70 %
    – TAM…stock price down from BRL 75.- TOP to 36.- now. Or DOWN 50 %

    Ohhhhhh….and in an “apparent” BOOMING ECONOMY BRAZIL IS …AND BOOMING STOCK MARKET !!!!!!

    Ohhhhhhh…..dear idiot…..do you even know….what you are talking about ?
    Looks like you are as idiot as the Brits.
    You always point your fingers at others….trying to hide a much bleaker reality in your own country.
    Wake up, stand up !
    Stop watching the Brazilian TV soap operas.
    Start educating yourself by reading more of what is happening elsewhere.

    And just to fill some of your ignorance :
    – 2008 should be a good year HERE : we have the EURO cup ! Sorry if you did not know !
    – my little country with no sea access, thus not with 5000 kms of beaches like in Brazil, with an overall bad weather HERE….has MORE TOURISM REVENUE THAN…..YOUR VERY LARGE TROPICAL MUD…..and your 5000 kms of dirty beaches !!!!

    We even have turned mountainous deserts….into white gold :
    – average cost per square meter for an average appartment in average ski resorts : US$ 8000.-
    – average cost per square meter for a prime appartment in trendy ski resorts : US$ 15’000 to 20’000.—
    No typing error.You read well !
    Better yet…..foreigners are queuing to buy more …to no avail……thus puting the prices higher, higher and higher !!!!!

    The prices are actual….not of 3 years ago….at the peak of the USA real estate prices, or the peak of 1 and 2 years ago in the EU !!!!!

    And guess who are the largest (in quantity) individuals real estate investors HERE ?
    The Brits.

    😀 😉 😀 😉 😀 😉

  • written by

    Ch C takes flight
    ..talking about Swiss investors, check out how Ch C is cutting back on travel expenses:

    http://news.bbc.co.uk/2/hi/in_pictures/7404781.stm

  • ..

    Fearing Inflation Brazil Gets Ready to Hike Interest Rates
    A very wise decision by our Central Bank President.This way, we will attract “Opportunistic Investors” from all over the world, not just from Switzerland.

    Keep up your good work, Dr. Meirelles .You are doing a great job.

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