Brazilian interest rates continue to fall
The Brazilian central bank continued its flexible monetary policy last night and lowered interest rates to facilitate economic growth.
The unanimous decision to drop rates by 0.25% to 12.75% was the 14th consecutive drop as the administration of Brazilian president Luiz Inacio Lula reverses the tight monetary policy of its first 4 years.
The bank is attempting to boost economic growth while preventing inflation from spiralling, and economists believe there is still room for further rate cuts.
The country's economy does appear to be picking up pace, with gross domestic product showing annualised growth of 3.8% in the fourth quarter of 2006, while over the whole year growth accelerated from 2.3% in 2005 to 2.9%.
"Better-than-expected growth in the fourth quarter reinforces the central bank's strategy to slow the pace of cuts in order to extend the cycle of interest rates reductions for a longer period of time," an economist at BES Investimentos told Bloomberg.
Roberto Padovani of WestLB added: "There's more room for the bank to lower interest rates without stoking inflation."
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