BRASÍLIA: Brazil’s central bank is expected to maintain its key interest rate at 14.25 percent this Wednesday after seven consecutive hikes aimed at holding back soaring inflation.
A weekly Central Bank survey of 100 economists on Tuesday said that further raising the rate would not help Brazil’s steep economic slowdown.
The world’s seventh biggest economy is in a recession predicted to extend through 2016 and previous rate rises have not prevented a steady rise in inflation to the current 12-year high of 9.56 percent.
The 14.25 percent interest rate is already one of the highest in big economies.
“The word crisis crops up on all sides. It’s not monetary policy that’s going to protect the country . . . and quickly reduce inflation,” said Zeina Latif, chief economist at XP Investimentos.
“The Central Bank has been very clear on this question: what’s happening is a prolonged pause and that’s why there’s no reason to think there’ll be a raise in rates now,” she said.
Analysts believe the high interest rate will gradually bring down price rises, but that a new hike could be risky.
The real has lost more than a quarter of its value against the US dollar this year and there are fears for Brazil’s investment grade credit rating after the government on Monday presented a 2016 budget that for the first time projects operating in the red.
In addition to the macroeconomic troubles, Brazil is being shaken by a political crisis with President Dilma Rousseff facing calls for her impeachment.