Wednesday, October 21, 2015

Brazil holds rate, to remain vigilant to reach inflation goal

     Brazil's central bank left its benchmark Selic rate steady at 14.25 percent, as expected, repeating the guidance that keeping the rate at this level "for a sufficiently long period is necessary for the convergence of inflation to the target at the end of 2016."
    The Central Bank of Brazil, which halted its tightening campaign in July after raising the rate by 700 basis points since April 2013, added that it "will remain vigilant to achieve this goal," a comment that was not included in its previous statement in September.
    Brazil's central bank added that the decision by its policy committee, Copom, was unanimous.
    Brazil's inflation rate eased slightly to 9.49 percent in September from 9.53 percent in August and a year-high of 9.56 percent in July, still well above the central bank's target of 4.50 percent.
    The central bank has pledged to reach its inflation goal by late 2016 but economists still expect inflation to be above 5 percent by that point due to the effect of higher import prices from exchange rate depreciation.
  Brazil's real has been depreciating since September 2014 but appeared to have changed direction earlier this month when it bounced back. But during the last week it has again dropped, trading at 3.94 to the U.S. dollar today, down 32 percent this year.
   Brazil's economy has been hit by lower demand from China with its Gross Domestic Product contracting by an annual 2.6 percent in the second quarter, the fifth consecutive quarter of declining output.


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