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Brazilian central bank cuts its key rate

Latest update : 2009-03-12

Brazil's central bank cut its key rate by 1.5 percentage points to 11.25 percent on Wednesday. The cut was bigger than the 1.0-percentage-point reduction many economists had been predicting.

AFP - Brazil's central bank on Wednesday cut its key rate by a larger-than-expected 1.5 percentage points to 11.25 percent.

The move followed official data which showed Brazil's economic growth had slowed dramatically under the global crisis, and industrial output was stalling.

The cut was bigger than the 1.0-percentage-point reduction many economists had been predicting, though several had so said they would not be surprised to see a more sizeable snip given the accumulating economic problems.

The government's Brazilian Institute of Geography and Statistics on Tuesday released data showing that gross domestic product fell a staggering 3.6 percent in the last quarter of 2008.

That put an end to a long run of high growth and reduced 2008's total GDP expansion to 5.1 percent.

There are fears that Brazilian growth is currently close to zero and may grow only tepidly later this year. Economists forecast 2009 growth will be just 1.3 percent.

The central bank's cut was the second since the global crisis exploded onto the scene last September. In January this year the bank slashed one percentage point off its reference Selic rate to 12.75 percent.

Wednesday's cut indicated that the bank was now putting its priority on stimulating Brazil's economy, shifting attention from its traditional wariness over inflation.

Despite the crisis, inflation continues to creep up in Brazil, and is currently running at 5.9 percent -- at the high end of the central bank's target range of 4.5 to 6.5 percent.

Date created : 2009-03-12