It looks like Brazil will have to tighten monetary policy further if they wish to head off inflation. According to a central bank indicator Brazil’s economy expanded 9.35% in May compared to the previous year. This data comes on the back of tentative signs that the economy is cooling with the Brazilian Economic Activity Index for May relatively steady. There is still growth but the pace has eased since April’s 10.9% year on year growth.
The central bank began its latest round of monetary tightening this month as the rapid growth gave rise to fears of overheating. However these fears have largely been dispelled by the tentative signs of cooling.
Brazil has the largest economy in Latin America and has expanded by 9% year on year in the first quarter; this was among the fastest growing in the world.
Despite this news in a weekly central bank survey analysts said that they expect the monetary policy committee to raise interest rates by a further 175 basis points for this year from the current 10.25%. To date the central bank has already lifted borrowing costs by 150 basis points since April.
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July 25th, 2010 at 8:29 AM
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