Global Biz

Brazil raises rates 4th time to curb inflation

(Agencies)
Updated: 2011-06-09 08:12

BRASILIA - Brazil's central bank raised its key interest rate for a fourth straight time on Wednesday as it seeks to rein in persistent inflation, and left the door open for further rate increases in coming months.

Policymakers voted unanimously to raise the so-called Selic rate to 12.25 percent from 12 percent, a move all 21 economists in a Reuters survey expected.

In a statement that was nearly identical to that of its previous rate hike in April, the bank said it had weighed risks to inflation and the still uncertain signs as to what extent Brazil's economic boom is slowing.

The bank said that, as a result, it believed that the "most adequate strategy" to bring inflation back down to the center of its target range next year was tight monetary policy "for a sufficiently prolonged period."

That language raised the possibility of another future rate hike, perhaps as soon as the bank's next meeting in July.

While monthly inflation is slowing after a surge on higher commodity prices and strong demand, 12-month inflation remains above the upper limit of the government's target, reaching 6.55 percent in May.

Central Bank President Alexandre Tombini has said the bank's policymakers are committed to ending the year with inflation as close as possible to the government target of 4.5 percent, plus or minus two percentage points.

Strong inflation puts Brazil among a group of powerhouse emerging markets, such as China and India, that are raising interest rates to try to control the price pressures that come with brisk growth.

In contrast, many developed markets, including the United States, find themselves trying to boost anemic growth by keeping interest rates ultra-low.