- POSTED: 09 Oct 2013 02:12
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Brazil's central bank, which opened a two-day meeting Tuesday, is expected to hike its Selic base rate half a percentage point to rein in inflation, according to market analysts.
SAO PAULO: Brazil's central bcank, which opened a two-day meeting Tuesday, is expected to hike its Selic base rate half a percentage point to rein in inflation, according to market analysts.
Most of the 100 analysts and operators consulted by the bank on a weekly basis said they expected the rate to go up from the current 9 per cent to 9.5 per cent.
The decision, expected to be announced by the bank's Monetary Policy Committee (COPOM) Wednesday, would mark the fifth consecutive rate increase this year in an adjustment cycle begun last April to combat surging inflation.
The analysts also said Copom should push the rate up to 9.75 per cent at its last meeting of the year scheduled for late November
In April, the committee pushed the rate up by 0.25 points to 7.5 per cent, the first increase since July 2011.
"The central bank will announce a 0.5 percentage point hike because it must continue combating inflationary pressure," said Marcelo Pereira, an analyst with the Tag Investimentos firm in Sao Paulo.
In August, 12-month inflation reached 6.09 per cent, well above the official target of 4.5 per cent.
Meanwhile, the industrial sector and labor unions have criticized the successive rate hikes, arguing that they risk hurting the country's economic recovery by making credit more expensive and discouraging investments.
Last year, GDP growth in the world's seventh largest economy was a paltry 0.9 per cent, following 2.7 per cent in 2011 and a sizzling 7.5 per cent in 2010.
The central bank has cut to 2.5 per cent its
GDP growth projection for this year, down from the 2.7 per cent it forecast in June.