Inflation rose to 5.91 percent last year, which is above the government’s 4.5 percent target rate. Inflation is forecast to run above 5 percent for the remainder of the year.
Although raising the interest rate is expected to cool inflation, the move is not without problems.
Inflation has caused the value of the real to rise against the dollar.
The interest rate hike is expected to attract foreign investors, who are already moving their money from lower interest rate investments in developed nations. That movement of capital into the country is also expected to cause the already overvalued real to rise even further. In addition, the increase in value will make Brazilian products, including such things as coffee, orange juice, soya beans, beef and iron ore, more expensive on world markets, which is not popular with Brazilian companies that export products.
rasilia, Brazil (AHN) – Brazil’s central bank has raised its key interest rate by half a percentage point to 11.25 percent in an effort to contain inflation.
The central bank’s monetary policy committee unanimously agreed to the rate hike late Wednesday.
No comments:
Post a Comment