The Central Bank of Brazil has revealed that decreasing the benchmark rate won’t work in favor of bringing down the inflation rate, which currently stands at a six year high.
In its quarterly inflation report Central Bank revealed that inflation will slow next year from its 7.33% rate in mid-September as a result of the European economic issues and slower economic escalation in the United States.
The bank also predicts that consumer prices will increase 4.7% in 2012 and would only reach the desired 4.5% in the second half of 2013. The Bank said that Latin America’s chief economy will increase 3.5 percent this year, lower than the previous prediction of 4 percent.
One policy maker said” By mitigating the effects of a more restrictive global environment in a timely manner, moderate adjustments in the basic rate are consistent with its inflation scenario,´´
It was only last month when several policy makers including Central Bank president Alexandre Tombini, stunned one and all by cutting the overnight rate by 0.50% to 12 %. This was only done after President Lima Rousseff guaranteed to bring Brazil on a “New Pathway” of lower borrowing costs. Many Analysts believed that this movie happened only because of political pressure.
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