Thursday, December 15, 2005


Central Bank cuts interest rate

Dec. 14th. The Brazilian Central Bank cut interest rates in 50 basis points.
Now, the SELIC (inter banks) rate is at 18%. Inflation forecasts are at around 5%.
That means that the real interest rate in Brazil is still at 13%, by far the biggest in the world.
As a consequence, there is still a large influx of hot money into the country, and the Brazilian currency, real, is still overvalued (currently, US$ 1 = R$ 2.25).

The graph below shows the interest rates in the recent past:
interest rates

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