Thursday, 20 October 2011

Brazil cuts interest rates

Brazil's central bank has announced cuts to the country's key interest rate from 12 per cent to 11.5 per cent due to a lagging global economy. The bank cut rates at the end of August, after upping them five times this year to combat inflation.

Despite the inflation rate rising to 7.3 per cent in September, all seven members of the bank's rate-setting committee voted for the latest cut. Last month, the cut its economic growth forecast for 2011 to 3.5 per cent. This is less than half the 7.5 per cent growth recorded last year.

The bank released a statement saying that a "moderate adjustment to the base rate" was required "to mitigate at this moment the effects coming from a more restrictive global environment".

The bank's target inflation rate is currently 4.5 per cent, and the current rate of 7.3 per cent is the country's highest in more than six years.

Before August's rate cuts the government had implemented a number of measures designed to prevent the economy from overheating. It announced in February £18 billion worth of spending cuts.

Sources: BBC News, Bloomberg, Reuters

For more news and expert analysis about Brazil, please see Brazil Focus.

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