Brazil real slips after central bank balks at rate hike

jueves 21 de enero de 2016 08:35 GYT
 

SAO PAULO Jan 21 (Reuters) - Brazil's real weakened in early trading on Thursday to around 4.16 to the dollar, nearing its lowest levels in more than a decade, after the central bank surprised markets and held rates stable despite inflation running at more than 10 percent a year.

The central bank's monetary policy committee, known as the Copom, kept rates at 14.25 percent after a two-day meeting that ended late Wednesday.

That marked an about-turn from more hawkish signals it had fed markets in previous weeks. Central bank chief Alexandre Tombini had flagged the change of stance on Tuesday, when he said the bank would take into account a significant downgrade of Brazil's growth outlook by the International Monetary Fund.

The currency has weakened nearly 5 percent so far in January after losing 32 percent of its face value against the greenback over 2015.

In a trading note after the bank's decision was announced, Barclays advised clients to target an exchange rate of 4.24 to the dollar.

Investors have been concerned over President Dilma Rousseff's policy direction after she dismissed her previous Finance Minister Joaquim Levy, considered a fiscal hawk who departed from her policy and was intent on clamping down on the government's big spending.

She replaced him with government loyalist Nelson Barbosa, who is pushing for the return to expanding credit to jump start the economy now in its worst recession in decades. (Reporting by Reese Ewing; Editing by Daniel Flynn and Bernadette Baum)