UPDATE 4-Brazil to pump up to $20 billion in credit into ailing economy
(Adds comment that bank has no plans for more measures in paragraph 5)
By Walter Brandimarte and Alonso Soto
RIO DE JANEIRO/BRASILIA, July 25 (Reuters) - Brazil's central bank on Friday announced measures to inject as much as 45 billion reais ($20 billion) in credit into the country's ailing economy, which is weighed down by the highest borrowing costs in nearly three years.
The bank said it was freeing up an estimated 30 billion reais in the financial system through changes to banks' reserve requirements. An additional 15 billion reais may be unlocked "over time" by easing minimal capital requirements in credit operations, a central bank official said.
The move "aims at improving the distribution of liquidity in the economy" given a recent slowdown in credit and relatively low levels of loan defaults, the bank said in a statement.
After years of slow growth, the Brazilian economy is flirting with a recession as manufacturing shrinks and industry workers lose their jobs. Inflation, however, is running at 6.5 percent, the ceiling of a government target, leaving policymakers in a difficult position.
The bank has no plans for more measures to bolster credit, a senior government official told Reuters later on Friday.
Some economists said the measures were at odds with a central bank policy of holding interest rates high, thus keeping credit tighter, to fight inflation.
Just last week, the bank held its benchmark interest rate at 11 percent, the highest since October 2011. On Thursday, it made clear interest rates will not be cut any time soon. Continuación...