Guido Mantega, the Finance minister of Brazil, told reporters this Tuesday, September 2, that the Brazilian government has no intention of lowering interest rates as long as inflation threatens to come in higher than the established target.
The Brazilian minister added that the country's benchmark lending rate, the Selic, will continue to rise until the government is assured that its original 4.5% inflation target will be met.
"Until this happens I do not think interest rates will be reduced," Mantega said in a radio interview. The benchmark rate is now 13%.
Mantega also said the Brazilian economy was decelerating following several measures to reduce available consumer credit which was having an impact on inflation.
"We've taken several measures to reduce the growth of domestic demand and the signals are that the economy is decelerating," said Mantega. He added that credit which was growing at an annualized 30%, "now is in the range of 15/20%, which is more sustainable in time."
A slower credit growth is expected to curb the demand for cars, electric appliances and new housing, helping to contain inflation.
Mantega said that inflation by the end of the year should be in the government's original target of 4.5% with a plus/minus tolerance of two percentage points which makes it 6.5%. "Our policy is long term stable, sustained growth".
Although August consumer prices index has not yet been made public by Brazil's statistics agency, in July inflation was running at an annual 6.4% with food prices continuing to push up costs across South America's largest and fast growing economy