Brazil in mid tightening cycle: central bank head

April 17, 2011 - 0:0

Brazil is in the middle of a monetary tightening cycle, central bank President Alexandre Tombini said on Friday, days before the bank is expected to announce a hike in the country’s benchmark lending rate.

Speaking at an event in Washington, he also warned that capital inflows are inflationary and can affect financial stability.
The monetary policy authority is expected to raise the Selic rate BRCBMP=ECI by 50 basis points to 12.25 percent next week from 11.75 percent currently, according to 14 out of 26 analysts in a Reuters poll.
Policymakers are trying to get inflation, which is currently hovering above 6 percent, closer to the center of its target of 4.5 percent, plus or minus 2 percentage points.
Out of 14 analysts who gave year-end forecasts in the poll, five expected the Selic rate to end the year at 12.25 percent.
Brazil has been the target of massive capital inflows, which emerging markets have blamed on ultra-easy monetary policy in advanced economies, and this has put pressure on its currency.
Despite aggressive intervention in foreign exchange markets, the real BRBY is hovering around its highest level against the U.S. dollar in two and a half years.
(Source: Reuters)