• Categories
  • Archives

Brazil Keeps Key Interest at 8.75% and Cuts Swap Line with US

Real currency from BrazilBrazil’s Copom (the Monetary Policy Committee at the Central Bank) for the sixth consecutive month, has kept the country’s basic interest rate at 8,75%. The rate is known as the Selic and it is technically the nominal interest rate.

The next meeting of the Copom is scheduled for mid March and no changes in the Selic are expected before then.

However, the real interest rate in Brazil, which is the Selic after projected inflation for the next 12 months is discounted, is estimated at 4%, which is the highest rate among the 40 developed and developing nations used by UpTrend Economic Consultants for its world ranking.

In the latest UpTrend ranking of countries by real interest rates Brazil is once again back on top of the list with the highest real interest rate in the world.

Here’s why (hint: the Brazilian economy is not to blame!): for the last nine months China had the dubious distinction of being at the top of the list, but due to a recent spike in Chinese inflation Brazil has now risen to the top followed closely by Indonesia.

Fed’s Swap Line

In the dark depths of the international financial crisis in October 2008, the Federal Reserve of the United States extended temporary reciprocal currency arrangements, known as swap lines, worth US$ 30 billion to Brazil along with Mexico, Korea and Singapore “… four large and systemically important economies,” in the words of the Fed. 

In practical terms this was not a loan, but a precautionary measure designed to help improve liquidity conditions and “mitigate the spread of difficulties in obtaining US dollar funding.”

In other words, the objective was to ensure that if the Brazilian economy needed dollars they could be made available through a currency swap (dollar and real).

This swap line arrangement is scheduled to terminate on February 1st. The Brazilian Central Bank, after consulting with monetary authorities in other countries, has decided not to renew it.

Brazil did not need the dollars. In a note, the Central Bank explained that as international financial markets are now operating satisfactorily, arrangements to deal with liquidity restrictions or problems on the Brazilian exchange rate market “…are no longer necessary.”

ABr

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Brasília, Brazil, in Search of a Soul

Brasília, Brazil’s capital city, feels distant and impersonal. It is over-planned, lacking the rambling, ...

Brazilian sugarcane cutter

Japanese Biofuel Project in Brazil Creates 50,000 Direct Jobs

The project is of colossal dimensions. It is the largest irrigation work in northeastern ...

Brazil's stock market Bovespa

Brazil’s Stock Market Surpasses 50,000 Points and Makes Bulls See Green

Driven by Brazil's growing exports, strong currency and weak inflation and inspired by the ...

Presidents Bush and Lula talk about ethanol at Transpetro, in São Paulo, Brazil

Lula & Bush Didn’t Discuss What Brazil Wanted Most: Tariff Reductions

Brazil and the United States signed today, March 9, a memorandum of cooperation in ...

Brazil’s Zero Hunger to Extend to Indians and Slaves Descendants

Brazil’s Ministry of Social Development and Hunger Alleviation, which currently distributes 6 million benefits through ...

Brazil Is Back to a Bull Market: Stocks Up 33% This Year

The capital market in Brazil is attracting great attention of investors of other emerging ...

US Crisis Takes Chinese to Brazil and Latin American Neighbors

Currently visiting Argentina, Chinese Vice-Premier Hui Liangvu signed accords to boost cooperation in agriculture, ...

Movement of Those Displaced by Dams

Brazil: An Explosive Situation Against Dams

There has been ongoing controversy and violence since the beginning of the construction of ...

How the Free Software Movement Is Winning the War in Brazil

Brazil made an impression on the free software world during the past five years ...

For This Brazilian Firm Half of Business Will Soon Come from Middle East

Brazilian company WK Comercial Exportadora's target, headquartered in Curitiba, in the southern state of ...