Brazil Raise Rates To Fight Inflation, Weakening Real

Brazil’s central bank raised the key rate by half a percentage point for a third straight meeting, as a plunge in the currency undermines efforts to slow inflation in the world’s second-largest emerging market.

The bank’s board, led by President Alexandre Tombini, today unanimously voted to raise the benchmark Selic rate to 9 percent from 8.5 percent, as forecast by 50 of 52 economists surveyed by Bloomberg. One economist expected a 75 basis-point increase, while one forecast a 25 basis-point boost.

“The committee considers that this decision will contribute to put inflation on a decline and assure that this trend will persist next year,” policy makers said, according to their statement posted on the central bank’s website. The statement was virtually identical to their July 10 communique.

Brazil’s central bank has stepped up efforts to prevent a declining real from undercutting the largest rate increase among the world’s major central banks by pushing inflation above its target range. While last week’s announcement of a $60 billion intervention plan has helped to buoy the currency, policy makers have maintained the pace of rate increases to fight pass-through to consumer prices, according to JPMorgan economist Fabio Akira.

Bloomberg

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