Brazil bank raises benchmark interest rate to 10.50%

16 January 2014 20:34 Source:ICIS News

LONDON (ICIS)--The Brazilian Central Bank’s Monetary Policy Committee (Copom) has raised the country’s benchmark interest rate, known as the Selic, by 50 basis points (bps) to 10.50%, the bank said on Thursday.

The decision to increase the rate was reached unanimously, the bank said, and follows the upward adjustment that began in April last year.

The new rate is the highest in two years, according to Central Bank data, and is a further attempt by the government to curb high inflation rates that threaten the country’s fragile economy.

According to Brazil’s national statistics association (IBGE), consumer prices jumped by 0.92% in December – the highest recorded month since April 2003, when prices rose by 0.97% – while annual inflation rose to 5.91% in the twelve months ending December 2013 from 5.84% recorded in 2012.

Meanwhile, Brazil’s economy contracted by 0.50% in the third quarter of 2013 compared with the prior quarter, according to IBGE data.

Economists surveyed by the Central Bank expect the economy to grow by just 1.99% in 2014.

By Simon West