Risks of inflation in Brazil decrease: central bank

13:21, July 30, 2010      

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The Monetary Policy Committee of Brazil's central bank said Thursday that the risks of inflation were decreasing in the country, according to the minutes of its meeting held last week.

The committee decided to increase the Selic basic interest rate by 0.5 percentage point, currently amounting to 10.75 annually.

The reduction of these risks justified a slower pace in adjusting the Selic rate. Before the committee's announcement, analysts had estimated it would reach 0.75 percentage points.

According to the monetary authority, there was a retraction of the projected price increases and a greater convergence between supply and demand in consumption.

"This process should be intensified, so signals of continuing imbalance between the rate of expansion of demand and aggregate supply need to be reversed, otherwise they may increase the risks of inflation," the committee said.

According to experts, the content of the minutes indicated the end of the adjustment cycle of Selic rate started in April, which may imply an increase of 0.5 percentage points in September. If this projection is confirmed, the Selic rate will close the year at 11.25 percent.

Moreover, the monetary authority considered that Brazilian economy was in a less intense pace than that observed at the beginning of the year.

Source: Xinhua


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