Brazil to Keep Interest Rates on Hold as Inflation Heats Up

“Brazil’s central bank signaled it will keep borrowing costs at a record low this year as it tries to manage faster inflation amid a slower than expected recovery.

The central bank board, led by Alexandre Tombini, kept the benchmark interest rate at 7.25 percent for the second straight meeting yesterday, matching the forecast of all 56 analysts surveyed by Bloomberg. In the statement accompanying the unanimous decision, policy makers reiterated that the best strategy is to keep monetary policy conditions unchanged for a “prolonged period.”

While inflation is slowing in Mexico and Chile, price pressures are building in Brazil as the government pumps demand by reducing taxes and expanding credit amid record low unemployment. At the same time, a contraction in investment and industrial output is complicating President Dilma Rousseff’s efforts to revive the slowest growth in three years….”

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