At its February 26th, 2014 meeting, Central Bank of Brazil decided to raise the benchmark interest rate for the second straight time by 25 bps to 10.75 percent, as widely expected.
The move was widely expected by markets since central bank’s President Alexandre Tombini recently said that past rate hikes have helped slow the inflation rate. In January, prices eased to 5.59 percent, the lowest rate in 14 months, but higher than the 4.5 percent the central bank targeted for 2014.
But today’s rate hike signalled that the pace of monetary tightening is slowing to avoid hurting the economy, which probably went into a recession in the last three months of 2013. The central bank’s IBC-br index contracted for the second straight month in December by a seasonally adjusted 1.35 percent over November, mainly due to weak industrial production and retails sales.