Brazil raised the benchmark rate to 10.5%: combating inflation the target
2014-01-17 15:50:00
The bank’s board, led by President Alexandre Tombini, voted 8-0 to raise the benchmark Selic by a half-point for a sixth straight meeting. From a record-low 7.25% in April, Brazil’s policy makers in 2013 lifted the Selic by 275 basis points.
Latin America’s biggest economy is facing accelerating inflation amid the worst two years of growth in more than a decade. Policy makers last year raised borrowing costs six straight times, including half-point increases at their last five meetings, in a bid to bolster business confidence and combat inflation exacerbated by a weaker Real and government spending.
“What’s clear is that policy makers are focused squarely on inflation,” Neil Shearing, chief emerging markets economist at Capital Economics Ltd., said by phone before today’s decision. “Growth is skewed too much toward consumption.”
Monthly inflation in December quickened the most since April 2003, as higher fuel costs helped prices jump 0.92%. Annual inflation in 2013 accelerated to 5.91% from 5.84% in 2012, thwarting pledges from Tombini that price increases would slow.
Last year’s inflation can be attributed to a weaker currency as well as pressures from the labor market and transportation industry, Tombini said in a Jan. 10 statement posted on the central bank website. The Real weakened 13% in 2013, the worst annual decline since 2008, on speculation the Federal Reserve would unwind monetary stimulus.
Likewise family and business sentiment has not improved in the face of persistent inflation. Consumer confidence as measured by the Fundacao Getulio Vargas fell in December to its lowest level since July, while industrial confidence was lower in December than when policy makers started raising rates in April.