Brazil set to hold key rate at 11%

GMT 19:54 2014 Tuesday ,15 July

Arab Today, arab today Brazil set to hold key rate at 11%

Brazilian President Dilma Rousseff
Sao Paulo - AFP

Brazil's central bank will hold its key interest rate steady at 11 percent, despite inflationary pressures, analysts agreed Tuesday.
Trader estimates saw no change likely ahead of a decision Wednesday by the central bank's monetary policy commission (Copom) despite a continuing trend of rising prices in June.
A 0.4 percentage points rise in June took the headline 12-month rate to 6.52 percent, creeping over an official target ceiling of 6.5 in South America's largest economy.
There is market consensus that the bank will sit tight as it has since April, when it added 0.25 percentage points for a ninth straight rise to limit rising prices.
The bank's weekly Focus unit canvassed some 100 economists and analysts and their call was for no change.
"The central bank will keep its rate steady at 11 percent -- that is the market consensus, despite high inflation," Eduardo Velho, chief economist with INVX Global Partners investment bank, told AFP.
Brazil's official median inflation target is 4.5 percent within tolerance parameters of two percentage points either side.
Brazil, having hosted the World Cup, is now in election season with leftist President Dilma Rousseff aiming for re-election in an October 5 poll.
Opinion polls make her the favorite despite recent sluggish growth.
Analysts believe the bank will not increase rates in the run-up period.
"The rate will stay at 11 percent until after the elections," forecast Robert Wood, Brazil analyst for the Economist Intelligence Unit.
Alex Agostini, chief economist with Brazilian debt rating agency Austin Rating, believed "it was a mistake to hold at the last meeting but this time we believe the rate will remain at 11 percent" on low growth fears.
After growth raced ahead 7.5 percent in 2010 it slumped to 1.0 percent in 2012 before recovering to 2.5 in 2013.
The market is forecasting just 1.0 percent for this year in the world's seventh-largest economy.
Copom started its meeting Tuesday and will release its decision after markets close on Wednesday.


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