Brazil hikes interest rates to 11.25 percent
Sao Paulo, Brazil (AHN) – [[The Brazil Central Bank increased the key lending rate to 11.25 percent to curb inflation. The hike was by 50 basis points from 10.75 percent.
Brazil followed the example of China, India, Poland and other countries in developing nations to slow down inflation rates and stop the flooding of dollar liquidity from the U.S.
Brazil, one of the world’s fastest growing economies with a gross domestic product growth rate of 7 percent last year, registered a 5.91 percent inflation rate in 2010 and is forecast to have a 5 percent inflation rate this year.
It is the first benchmark rate hike under new President Dilma Rousseff and Brazilian Central Bank Governor Alexandre Tombini, who both assumed office this month.
However, the interest rate hike is expected to bring in more foreign money, which would add to the pressure on the Brazilian currency, the real, which is overvalued. The high benchmark rate has attracted U.S., European and Japanese funds in search of high yields.
Tombini warned that the bank may increase key lending rates in the future to battle inflation. Previously, the bank mandated a large hike in bank’s reserve requirements to curb lending.
Because of the strong Brazilian currency, the country’s export industry has suffered resulting in Brazil’s trade deficit doubling in 2010 to $71 billion. Asian exports have flooded Brazil, which prompted the government to put in place 28 anti-dumping measures against China. The measures include steel, tires, synthetic fibers, chemicals, shoes and toys.
View full post on Economy, Business And Finance Stories
