Brazilian Central Bank Lowers Key Rate
Brazil’s central bank made a larger-than-expected cut in the country’s key interest rate Wednesday, hoping to keep South America’s largest economy from sliding in recession.
The move helped drive Brazilian share prices to their highest levels since March 2002.
The bank lowered its benchmark short-term rate to 22% from 24.5%. It was the third rate cut in as many months and the deepest in four years.
The U.S. Federal Reserve and other major central banks have kept short-term rates at generational lows this year, trying to jump-start the global economy. But Brazil has been hampered by a high inflation rate.
The central bank raised interest rates early this year as annualized inflation reached 12.5%, a seven-year high. In recent months, however, prices have come down or risen little.
Brazilian President Luiz Inacio Lula da Silva is under intense pressure to create millions of jobs, control inflation and lower interest rates.
“It’s a positive sign for economic players and shows that the government is moving toward loosening monetary policy, which is good for production and employment,” said Armando Monteiro Neto, president of the National Confederation of Industries, a leading Brazilian business association.
Brazil’s main stock index, the Bovespa, jumped 309 points, or 2.2%, to 14,466.9 on Wednesday, and is up 28.4% this year.
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