(21 January 2011 – Global) In an effort to curb steep inflation Brazil’s central bank raised interest rates half a percentage point to 11.25 percent.Inflation rose to 5.91 percent late last year, well above the government’s target of 4.5percent.
The unanimous decision by the central bank’s monetary policy committee will however continue to put pressure on the nation’s currency, causing problems for exporters as Brazil’s currency, the real, soars against the dollar, which has already risen 100 percent against the dollar in the last eight years.
The nation’s new president Dilma Rousseff has been caught off-guard by rising consumer prices, after promising action to lower the high interest rate.
On a positive the high interest rate will lure in foreign investors, who are guaranteed rate-linked returns that are higher than any other economy in the world, while anyone looking to make a credit related purchase will be hit with expensive rates.