Brazilian Selic Rate Lifted for First Time Since September 2008

April 28, 2010

COPOM, the monetary policy committee at the Central Bank of Brazil, raised its key Selic interest rate from a record low of 8.75% to 9.5%.  Analysts were unanimous in projecting an increase but split over whether the advance would be by 50, 75, or 100 basis points. Brazilian CPI inflation has accelerated from 4.3% at end-2009 to 5.2% as of April, which exceeds the 2010 target of 4.5%.  This acceleration occurred despite a strengthening exchange rate, with the real now some 27% stronger against the dollar than a year ago.  Real GDP grew 8.4% annualized in the final quarter of 2009, and industrial production leaped 18.4% between February 2009 and February 2010.  The eight members of COPOM were unanimously in favor of today’s announced action.  More hikes are likely.  The last cyclical peak in the Selic rate from September 2008 through much of January 2009 was at 13.75%.  The Selic rate was reduced by 100 bps in January 2009, 150 bps in March 2009, 100 bps each in April and June and one final time by 50 bps in July of last year.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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