Brazil Central Bank Raises Rates to 10 Percent

Brazil’s central bank has raised its benchmark interest rate to 10% from 9.5%, the sixth time in a row that it has put up borrowing costs.

The latest rise has taken the key rate to the highest level since March 2012.

The rises come as Brazil has been trying to rein in inflation. Consumer prices in the country rose by 5.8% in October from a year earlier, above policymakers’ 4.5% target.

Prices have been rising in part due to the fall in the Brazilian currency.

The Brazilian real has fallen nearly 20% against the US dollar since May this year.

The decline has been blamed on an outflow of capital triggered by speculation that the US Federal Reserve will taper its stimulus policy, leading to a stronger dollar.

The Fed has used the programme, known as quantitative easing, to increase the money supply and improve liquidity in the financial system.

A part of that increased liquidity flowed to emerging economies, triggering a surge in stock and asset prices over the past few years.

But fears that the US may scale back the programme has seen investors pull out money from emerging nations such as Brazil, hurting their currencies.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza