Investment inflows into Brazil remain “strong” so far in March, central bank president Alexandre Tombini said on Wednesday, adding that 9.2 billion dollars entered the country in the form of portfolio and foreign direct investments in February.
Tombini told attendants at an event in São Paulo sponsored by Goldman Sachs Group Inc that the pace of Brazil’s economic expansion this year should be similar to 2013’s growth rate. He said that the impact of monetary policy is “cumulative” and “comes with a lag time,” adding policies at the current moment must stay “especially vigilant” of inflation.
Steady foreign investment has helped cover Brazil’s growing current account deficit, alleviating pressure on the foreign exchange market. Brazil’s trade deficit has increased recently as the appetite for imports, especially fuel, remains strong and overseas trips by Brazilian tourists taking advantage of a still strong currency.
Rising interests rates have made Brazil more attractive to foreign investors by offering a higher return. The central bank is widely expected to raise its benchmark interest for a ninth straight time in April to 11.00%, the highest since early 2012.
The rate hikes started in April last year as policymakers struggled to lower inflation expectations towards the midpoint of their target range, or 4.5%.