Fresh rate rise by Brazil cen­tral bank to counter in­fla­tion

The China Post - - WORLD BUSINESS -

Brazil’s cen­tral bank Wed­nes­day raised its key in­ter­est rate a half point to 13.75 per­cent, a sixth straight rise as Latin Amer­ica’s l argest econ­omy fights to stem in­fla­tion dur­ing a slow­down.

The bank’s mon­e­tary pol­icy com­mit­tee ( Copom) unan­i­mously agreed the rise as it stepped up anti- in­fla­tion­ary ef­forts as prices con­tinue to out­strip a cen­tral gov­ern­ment tar­get of 4.5 per­cent af­ter it “eval­u­ated the macro- eco­nomic and in­fla­tion­ary out­look.”

The in­crease had been ex­pected by an­a­lysts af­ter April saw 12- monthly in­fla­tion hit 8.17 per­cent in the world’s sev­enth­largest econ­omy, adding to an econ­omy strug­gling amid a fifth straight year of low growth.

Last month’s in­crease in the key rate had seen it climb to its high­est level since Jan­uary 2009.

Gov­ern­ment and In­ter­na­tional Mon­e­tary Fund fore­casts ex­pect GDP to con­tract be­tween 1.0 and 1.2 per­cent this year, which would be the worst show­ing in a quar­ter of a cen­tury.

Tues­day had brought a fur­ther blow for the gov­ern­ment as the na­tional sta­tis­ti­cal in­sti­tute IBGE in­di­cated industrial pro- duc­tion slid 1.2 per­cent in April.

An­a­lysts fore­cast in­ter­est rates will close out the year at 14 per­cent be­fore fall­ing back.

In­dus­try has voiced con­cern about the cost of ob­tain­ing credit dur­ing a slow­down as rates con­tinue to rise.

But in­fla­tion wor­ries have per­suaded the gov­ern­ment to keep rates high af­ter price rises hit 6.41 per­cent in 2014, just be­low the gov­ern­ment’s max­i­mum tol­er­ated rate of 6.5 per­cent.

The of­fi­cial cen­tral an­nual tar­get rate re­mains 4.5 per­cent.

Pres­i­dent Dilma Rouss­eff, re- elected in Oc­to­ber, has re- sponded to the bleak out­look by par­ing back the bud­get while promis­ing to pro­tect so­cial pro­grams for the work­ing class.

Brasilia last month un­veiled a pack­age of spend­ing cuts worth some US$ 23 bil­lion de­signed to put the coun­try on track to­ward achiev­ing an am­bi­tious sur­plus of 1.2 per­cent of GDP this year and 2.0 per­cent in 2016- 17.

The cuts are the largest in the 12 years that the rul­ing Work­ers Party has been in of­fice.

Af­ter sev­eral years of boom­ing growth, Brazil’s econ­omy has slowed in re­cent years and growth last year was a very muted 0.1 per­cent.

Newspapers in English

Newspapers from Taiwan

© PressReader. All rights reserved.