Thursday, May 19, 2005

 

Central Bank increases interest rate

The Central Bank of Brazil increased the basic interest rate from 19.5% to 19.75% per year.
Read the note of Central Bank of Brazil about interest rates.

The graph below shows the curve of the interest rates since the beginning of government Lula.

interest rates in Brazil



The Central Bank and the market forecast an inflation for 2005 of about 6.3%, above the inflation target, of 5.1%; this would be the main reason to lead to the increase in rates.

Brazil has, by far, the highest real interest rate in the world (real interest rate = nominal rate - inflation). According to O Globo, Brazil has a rate of 13.6% per year, while the second highest, Turkey, is just 6.6%.

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