Brazil Raises Interest Rate to 6-Year High

Brazil increased its key interest rate by 50bps to 13.25 percent on April 29th. It is the fifth consecutive hike, bringing the rate to its highest level since 2009.

The decision was quite expected by markets as inflation hit a twelve-year high of 8.13 percent in March.

Rate hike campaign was initiated last September when inflation reached the upper-limit of official target range of 6.5 percent. The central bank raised the Selic rate by 225 basis points since then in an attempt to convince markets it is committed to bring inflation back to target.

Yet, tighten monetary policy may hurt the economy further. The GDP contracted for the third straight quarter by an annual 0.2 percent in the last three months of 2014.

So far, industrial production fell 0.9 percent mom in February, retail sales shrank 0.1 percent and unemployment rate was reported at 6.2 percent in March, the highest in three years.

Brazil Raises Interest Rate to 6-Year High

Joana Taborda |
5/11/2015 5:09:37 PM