Brazil also seeks growth through monetary policy. The Brazilian central bank cut its key rate for the seventh consecutive time. However, this time the reduction was less: only 50 basic points against 75 in the previous times. The Selic, the basic interest rate for the Brazilian economy, has fallen to 8,5%, the lowest level in the history of the real.
The central bank said that "at this moment, the risks for an increase in inflation remain limited". Indeed, "given the fragility of the global economy, the contribution of the external sector tends to make it decrease". The governor of the central institute, Alexandre Tombini, said he expects rates to converge to the levels of the other major emerging countries (BRICS). Indeed, today the rates of India and Russia are 8%, that of China is 6,5% and that of South Africa is 5,5%.
Economy Minister Guido Mantega also said he expected a further downward revision of rates, underlining that the Brazilian banks are lending more, at lower rates, to stimulate growth.
Slowing down the country's economic growth, confirmed by the downward revision of the official estimates of the increase in GDP in 2012 which will not exceed 3%, is the international situation and above all the braking of China, from which it receives a large part of foreign direct investment and to which Brazil is a major exporter of commodities.
On the square of Sao Paulo since the beginning of the year the main index, the Bovespa, has lost 5,21% while, year-to-day, the decline was 16,56%. The Brazilian market is carefully watching the evolution of the crisis in Europe and according to Bruno Gonçalves, an analyst from Sao Paulo, “the bag still has room to fall“. Yesterday Bovespa closed at 53.797,91 points, the worst value since October 10, 2011.
