Brazil lifts key rate to 11.25%

Brazil lifts key rate to 11.25%

Thursday, October 30, 2014 12:49 am

Dilma Rousseff: Interest rate up; businesses want lower rate

Dilma Rousseff: Interest rate up; businesses want lower rate

Brazil’s central bank on Wednesday raised its key interest rate by 25 basis points to 11.25 percent — the first hike since April — in the wake of leftist Dilma Rousseff’s re-election as president.

Analysts had predicted the bank would leave the main Selic rate on hold at 11 percent.

But with Brazil fighting inflationary pressures, the rates committee elected to send out a signal given what it termed a “less favorable risk balance for inflation.

“In the light of this, the committee considers it opportune to adjust monetary conditions” in order to facilitate a “more benign scenario for inflation in 2015 to 2016,” the bank said in a statement.

Last month, inflation moved a quarter point above a government target ceiling of 6.5 percent, but the market predicts it will end the year back down at 6.45 percent.

On Tuesday, the bank’s weekly survey of 100 market watchers had indicated they did not expect the rate to change before next year at the earliest.

Rates had been on hold at 11 percent since April, which saw the end of a series of nine monthly increases as part of attempts to hold down prices.

Rousseff, re-elected Sunday, has been resisting rises that could further depress consumer demand as she seeks to re-float the economy in her second term starting officially on January 1.

Industry, meanwhile, wants lower rates to kickstart a recovery.

“Brazil has the highest rates in the world,” Benjamin Steinbruch, president of Sao Paulo state’s Federation of Industry, complained Tuesday following the central bank’s last meeting.

Brazilian growth was sluggish across Rousseff’s first four-year term and the market forecasts GDP will grow just 0.27 percent this year and 1.0 percent in 2015.

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