|
 In a surprise move, Brazil's Central Bank (BC) decided today to cut by a full percentage point its key interest rate, the Selic. The reduction from 13.75% to 12.75% is the largest one in five years and wasn't anticipated by market analysts.
Apparently, the members of Copom (Monetary Policy Committee) opted for the aggressive measure, in Brazilian terms, after pondering that the Brazilian inflation is in check and weighing the impact of the international financial crisis on the Brazilian economy.
The decision wasn't unanimous. Three directors of BC voted for a smaller cut of 0,75 percentage point, which would leave interests rate at 13% a year.
On Monday, a survey from the Central Bank showed that most Brazilian financial analysts were expecting a 0.5% cut. However, the announcement that 654,000 jobs had been lost in December, the worst number in 10 years, seem to have changed some minds among experts and inside the BC.
At the end of the meeting, the Copom released the following note: "Evaluating the outlook for inflation, the Copom decided, at this time, to reduce the Selic rate to 12.75% a year, without bias, for five votes in favor and three votes for the Selic rate reduction of 0.75 percentage point.
"With that, the Committee begins the process of monetary policy flexibilization carrying out immediately an important part of the interests basic rate action, without losing sight of the inflation target."
Commenting on the cut, ratings company Fitch, which currently rates Brazil at BBB- with a Stable Outlook, released a note warning Brazil to be careful not to stoke inflation:
"Falling inflation and inflationary expectations as well as a sharper-than-expected deceleration in economic activity have provided BCB the flexibility to begin an early easing cycle with an aggressive cut. However, the central bank needs to be vigilant against inflation risks stemming from a weaker Brazilian real," said Shelly Shetty, Senior Director in Fitch's Latin American Sovereign Group.
"The BCB's interest rate cut as well as its pro-active stance to ensure adequate liquidity in the financial system should provide some support to the faltering domestic demand outlook," Shetty added.
"Maintaining a credible monetary and exchange rate policy framework will be critical for Brazil to weather the unfavorable external environment and minimize the fallout from global recession, falling commodity prices and global de-leveraging," according to Shetty.
 |
Subscribe to this comment's feed
Brazil received a huge boost in its international image with its selection as the host of the 2016 Olympics, but it was really just the cherry on top of the overall recognition of the country's ascension to the ranks of one of the world's most important countries. Now, as it finally takes its place on the world scene, there has been a great deal of concern about what kind of image Brazil hopes to project, now that the world is really paying attention. 
The only good thing to say about the visit to Brazil of Iran's president, Mahmoud Ahmadinejad, on Monday November 23, is that it was mercifully short and lasted less than 24 hours. Ahmadinejad had his picture taken being hugged by president Luiz Inácio Lula da Silva who gave him a warm welcome and said Iran had every right to develop nuclear energy for peaceful purposes. 
The small, coastal town of Condé is located just a twenty minute's drive from João Pessoa, the capital of Paraíba. The Northeast of Brazil has historically been a place of encounter and mixing between peoples. For millenia groups of indigenous people fished, farmed, migrated and sometimes fought along this large, fertile area. 
The Brazilian diplo-MÁ-cia (bad diplomacy) carries on its accelerated course towards the non-acknowledgment of human rights, although sometimes it takes pleasure in saying that it does precisely the opposite. The visit of Iran's president, Mahmoud Ahmadinejad, is another example of a diplomatic omission that verges on hypocrisy. 
On July 4, 2006, representatives of Argentina, Brazil, Paraguay and Uruguay met in Caracas to sign the protocol for the entrance of Venezuela into the Southern Common Market (Mercosur). After two and a half years, the protocol was approved by the legislative bodies of Argentina and Uruguay, and as of now it may be only days away from being ratified by the continent's economic megalith, Brazil. 
Some sectors of the fight against AIDS have suggested that Thabo Mbeki, the former president of South Africa, committed genocide through his absence from the fight against the illness in his country throughout his two terms. 
One hundred and eleven years after Brazil abolished slavery, the number of workers deprived of their freedom is still huge. They raise cattle, produce charcoal, sugar cane or timber. Some of them, most undocumented Bolivians, work in basements of small apparel factories in São Paulo and other metropolis. 
On November 7, 2009 a few friends and I had an opportunity to take a look inside a Brazilian jail outside the city of Rio de Janeiro. We were able to take some amateur footage of our experience on video (see link below). It's no surprise, of course, that the typical Brazilian jail lacks some of the functionality of those in North America or Europe, but our experience that day was quite shocking. 
Depletion of the Amazon Rainforest is not a new concern facing environmentalists, biologists, ecologists, and a growing number of the Amazonian indigenous peoples. For decades they have feared for the fate of the world's most biologically diverse and species-rich hothouse. 
Geisy Arruda made history this week in Brazil, but for all the wrong reasons. What began as a poorly planned fashion statement has become a worldwide tale. Geisy decided to wear a pink mini-dress to her private college in São Paulo state, and after that, all hell broke loose.