Brazil's central bank raises rates fourth time in row
Brazil's central bank raised interest rates to their highest level in almost two years, lifting borrowing costs for the fourth time since April to keep inflation in check.
By Agencies |
BRASILIA: Brazil's central bank raised interest rates on Wednesday to their highest level in almost two years, lifting borrowing costs for the fourth time since April to keep inflation in check as the economy gains steam.
The bank's monetary policy committee, known as Copom, voted to increase its benchmark lending rate to 13.75 per cent from 13 per cent. It also raised the so-called Selic rate by 75 basis points at its last meeting in July, citing concerns about inflation.
Wednesday's decision, however, was not unanimous, with three of the committee's eight members voting for a smaller increase to 13.5 per cent. In a brief statement, the committee offered the same justification for the rate increase as it did in July, saying it was seeking to bring "inflation toward the target in a timely manner."
All 23 economists surveyed in a poll last week predicted the Copom would lift the Selic to 13.75 per cent, its highest level since Nov 2006.
But the split decision came as a surprise, prompting some analysts to bet that future rate increases will be smaller. "I think they're signaling that in the next meeting they're going to raise rates by 50 basis points," said Carlos Thadeu de Freitas, a former central bank director who is now chief economist at the National Commerce Confederation.
Brazil's central bank has been raising rates at a time when monetary authorities in the United States and Europe are reluctant to do so for fear of hampering their already sluggish economies, despite concerns about global inflation. Brazil, by contrast, is riding its biggest burst of economic growth in three decades, giving the central bank more leeway to act decisively to rein in inflation.
Official data released earlier on Wednesday showed that Brazil's economy, Latin America's largest, grew 1.6 per cent in the second quarter from the first and a hefty 6.1 per cent from the year-ago period. But the strong economic growth, coupled with a spike in global food prices, has stoked inflation.
Although inflation has slowed in the last three months, it is still on track to surpass the center of the government's year-end inflation target of 4.5 per cent. The benchmark IPCA consumer price index - which the central bank uses as a guide when setting rates - has risen 6.17 per cent in the 12 months through August.
The index is expected to climb 6.27 per cent this year, according to the latest central bank survey of local financial institutions.
Central Bank President Henrique Meirelles has repeatedly said in recent weeks that the bank hopes to bring inflation back down to the center of the target in 2009.
The bank also has an inflation target of 4.5 per cent for next year and 2010, with a tolerance band of plus or minus 2 per centage points. The Copom next meets to decide on rates on Oct. 28-29.
The bank's monetary policy committee, known as Copom, voted to increase its benchmark lending rate to 13.75 per cent from 13 per cent. It also raised the so-called Selic rate by 75 basis points at its last meeting in July, citing concerns about inflation.
Wednesday's decision, however, was not unanimous, with three of the committee's eight members voting for a smaller increase to 13.5 per cent. In a brief statement, the committee offered the same justification for the rate increase as it did in July, saying it was seeking to bring "inflation toward the target in a timely manner."
All 23 economists surveyed in a poll last week predicted the Copom would lift the Selic to 13.75 per cent, its highest level since Nov 2006.
But the split decision came as a surprise, prompting some analysts to bet that future rate increases will be smaller. "I think they're signaling that in the next meeting they're going to raise rates by 50 basis points," said Carlos Thadeu de Freitas, a former central bank director who is now chief economist at the National Commerce Confederation.
Brazil's central bank has been raising rates at a time when monetary authorities in the United States and Europe are reluctant to do so for fear of hampering their already sluggish economies, despite concerns about global inflation. Brazil, by contrast, is riding its biggest burst of economic growth in three decades, giving the central bank more leeway to act decisively to rein in inflation.
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Official data released earlier on Wednesday showed that Brazil's economy, Latin America's largest, grew 1.6 per cent in the second quarter from the first and a hefty 6.1 per cent from the year-ago period. But the strong economic growth, coupled with a spike in global food prices, has stoked inflation.
Although inflation has slowed in the last three months, it is still on track to surpass the center of the government's year-end inflation target of 4.5 per cent. The benchmark IPCA consumer price index - which the central bank uses as a guide when setting rates - has risen 6.17 per cent in the 12 months through August.
The index is expected to climb 6.27 per cent this year, according to the latest central bank survey of local financial institutions.
Central Bank President Henrique Meirelles has repeatedly said in recent weeks that the bank hopes to bring inflation back down to the center of the target in 2009.
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The bank also has an inflation target of 4.5 per cent for next year and 2010, with a tolerance band of plus or minus 2 per centage points. The Copom next meets to decide on rates on Oct. 28-29.
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