Thursday, September 1, 2011

Brazilian CB Cuts Rates By 0.50%: Brazilians Highly Suspicious of Reasons: Crazy Politicians

The Brazilian Central Bank unexpectedly cut interest rates by a rather alrge 0.50%. The move is officially due to "global slowdown". '"the committee saw a substantial deterioration in the international outlook as the U.S. and Europe struggle with debt and anemic economic growth."

However, Brazilians are highly suspicious of the move and are worried about government pressure (i.e, interference on the CB).

Moreover, new president Dilma Rousseff, wants real interest rates (nominal less inflation) to be 2-3% by the end of 2014. This seems like crazy talk as the currently stands at 6.5% with high inflation risks. For the rates to drop that much it means lowerin the inflation rate, at a time when the WC 2014 and Olympics 2016 is generating a construction boom.

This just seems like crazy politicians, really crazy.
Does this look like inflation is slowing down?

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