Wednesday, October 9, 2013

Brazil raises Selic rate for fifth time in a row to 9.50%

    Brazil's central bank raised its benchmark interest rate for the fifth time in a row, repeating that it expects the decision "to contribute to bring down inflation and ensure that this trend will continue next year."
    The Central Bank of Brazil, which raised its Selic rate by 50 basis points to 9.50 percent, as expected, has now raised rates by 225 basis points this year to suppress inflation. Last year the central bank cut rates by 375 basis points to stimulate waning economic growth.
    As in previous months, the decision by the central bank's policy committee, known as Copom, was unanimous and no guidance or bias about future moves was indicated.
   Brazil's inflation rate continued to drop in September to 5.86 percent, its third monthly decline since hitting a 2013 high of 6.7 percent in June, from 6.09 percent in August.
    But it is still in the upper end of the central bank's target range and economist expect the central bank to raise its rate further. The central bank targets inflation of 4.5 percent, plus/minus two percentage points.
    Last month the central bank cut its forecast for inflation this year to 5.8 percent from 6.0 percent but raised the 2014 forecast to 5.7 percent from 5.4 percent.

   Brazil's economy appears to be reacting to the central bank's stimulative rate cuts with Gross Domestic Product expanding by 1.5 percent in the second quarter from the first, with annual growth accelerating to 3.3 percent from 1.9 percent in the first quarter.
    However, in its quarterly inflation report the central bank revised down its growth estimate for this year to 2.5 percent from 2.7 percent . The International Monetary Fund (IMF) this week maintained its 2013 growth forecast at 2.5 percent but cut its forecast to 2.5 percent form 3.2 percent.
   
    www.CentralBankNews.info


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