3rd Time’s the Charm? Brazil Raises Central Bank Rate Again

Brazil’s central bank raised borrowing costs by half a percentage point for a second straight meeting, as the fastest inflation in 20 months undermines economic growth and fuels social unrest.

The bank’s board, led by President Alexandre Tombini, today voted unanimously to raise the benchmark Selic rate by 50 basis points to 8.50 percent, as forecast by all 51 economists surveyed by Bloomberg.

“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 May 29 communique.

Rising prices helped spark the largest street protests in decades last month that also saw President Dilma Rousseff’s approval ratings plunge by almost half. Above-target inflation has undercut months of government stimulus by reducing consumer confidence and curbing retail sales and industrial output. After a quarter-point rate increase in April, policy makers doubled the pace in May and reiterated warnings that the outlook for inflation remains unfavorable.

Bloomberg

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