Brazil cenbank to opt for 'classical' responses to face global risks

sábado 29 de marzo de 2014 15:27 GYT
 

By Alonso Soto

COSTA DO SAUIPE, March 29 (Reuters) - Brazil will continue to respond in a "classical manner" to the changes in the global economy that have shifted capital flows away from many emerging-market nations, central bank chief Alexandre Tombini said on Saturday.

The U.S.-trained economist said Brazil has continued to see an influx of capital from abroad, a testament of the effectiveness of authorities' policies.

"Brazil has and will continue to respond in classical and robust fashion to the challenges posed by the new international outlook," Tombini said in a speech at an Institute of International Finance forum in Costa do Sauipe.

The withdrawal of monetary stimulus in the United States and a slowdown of the Chinese economy have sparked an exodus of foreign investors from once-booming emerging-market nations.

Last year the Brazilian central bank launched a daily forex program to sell currency swaps - derivatives that provide hedges against currency losses - to ease exchange rate volatility. A weaker Brazilian real raises the value of imports, stoking inflation.

Under Tombini the bank has raised its benchmark Selic rate by 350 basis points to 10.75 percent since April in a bid to contain inflation that has remained above the center of the official target for the last two years.

The bank on Thursday raised its 2014 inflation forecast sharply, signaling it may prolong its cycle of interest-rate hikes to battle naggingly high inflation.

The central bank increased its 2014 inflation forecast to 6.1 percent from its previous estimate of 5.6 percent as a severe drought in southern Brazil hurt crops and raised food prices. (Reporting by Alonso Soto; editing by Gunna Dickson)