All eyes will be on Brazil’s central bank this week as it decides whether or not to start raising interest rates again. Most economists expect a 0.25 percentage point increase. The bank’s target overnight (Selic) rate has been parked at 11.25 per cent a year since last September, when the bank halted a two-year easing cycle from 19.75 per cent.
Cheaper credit has been a powerful stimulus for domestic consumption, which has taken over from the export sector as the main driver of the economy. But with steady rises in food prices over recent months and in the belief that consumption will continue to put pressure on prices across the economy, the bank has warned that a rise may be necessary. This could be the week it delivers.
