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Latino Daily News

Thursday April 29, 2010

Brazil Raises Interest Rates First Time in 2 Years

WHILE the developed world tries to stave off a wave of sovereign debt defaults in Europe, the Brazilian economy is partying like it’s 2008. Consensus forecasts for real GDP growth this year have now reached a brisk 6%, and the most bullish estimates project a percentage point more—the best performance since 1986.

But many analysts reckon that multiple inefficiencies mean that the economy can only grow at 4.5% or so without triggering inflation. On April 28th the Central Bank recognised the danger of overheating. Its monetary-policy committee raised the SELIC benchmark interest rate by 75 basis points to 9.5%, its first increase in a year and a half. It is expected to tighten much more in coming months. But whether that will be enough to avoid a hard landing remains in doubt.

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