Brazil set to maintain interest rates ahead of election

miércoles 3 de septiembre de 2014 01:00 GYT
 

By Alonso Soto

BRASILIA, Sept 3 (Reuters) - Brazil will likely keep interest rates on hold for the third straight time on Wednesday, refraining from any monetary action to help an economy that has fallen into recession just weeks before a heated presidential election.

All 53 economists polled by Reuters said the central bank's 8-member monetary policy committee, known as Copom, will keep its benchmark Selic rate at a more-than two year high of 11 percent.

The decision to keep rates unchanged is not an easy one for a central bank under growing pressure to do more to rescue an economy that entered recession in the first half of the year.

However, persistently high inflation and a closely contested October election is expected to keep policymakers in wait-and-see mode for a while, analysts say.

"The recession exerts great pressure on the central bank to support the economy," said Neil Shearing, senior economist with Capital Economics in London. "But any policy stimulus at this point is a risk. It could do more harm than good."

The central bank has signaled it will keep rates stable for some time as past monetary tightening drags down inflation, which on an annual basis remains near the ceiling of the official target of 4.5 percent with a tolerance margin of plus or minus 2 percentage points.

Over the last three years under its chief Alexandre Tombini, the central bank slashed rates to record lows of 7.25 percent only to make a u-turn and raise rates to two-year highs as inflation kept climbing despite a weaker economy.

The government of President Dilma Rousseff has partly blamed higher rates for the country's first recession in five years. Finance Minister Guido Mantega has said he will work to create conditions for the bank to cut rates in 2015.   Continuación...