Wednesday, December 3, 2014

Brazil raises rate 50 bps, further rises "with parsimony"

    Brazil's central bank raised its benchmark Selic rate by a higher-than-expected 50 basis points to 11.75 percent but said future rate increases would only be deployed sparingly.
    The Central Bank of Brazil, which has now raised its rate by 175 basis points this year to beat back stubborn inflation, said in a brief statement that the rate rise was decided unanimously by its policy committee - known as Copom - and there was no bias indicated.
    "Considering the cumulative and lagged effects of monetary policy, among other factors, the Committee believes that the additional efforts of monetary policy should tend to be deployed sparingly," the central bank said, according to a translation of its statement in Portuguese.
    Later the central bank released its statement in English language, saying:
    "The Copom unanimously decided to intensify, at this moment, the adjustment of the Selic rate, and increase it by 0.50 p.p. to 11.75 percent, without bias.
    Considering the cumulative and lagged effects of the monetary policy, among other factors, the Committee evaluates that the additional effort of monetary policy tends to be implemented with parsimony."
    Most economists had expected the central bank to raise its rate by 25 basis points to send a strong message about its determination to push inflation down to its target of 4.5 percent, plus/minus 2 percentage points.
    Last week Alexandre Tombini, central bank president, said the central bank's main mission was to slow inflation to its target by no later than 2016.
    Brazil's headline inflation rate eased to 6.59 percent in October form 6.75 percent in September while its Gross Domestic Product expanded by a slight 0.1 percent in the third quarter from the second quarter for annual contraction of 0.2 percent, smaller than the 0.9 percent contraction in the second quarter.



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