Since the Great Recession began, central banks have had to invent unorthodox ways to stimulate the economy, once the traditional maneuvers via interest rates have exhausted. In addition to the quantitative expansion of the currency, the Federal Reserve made use of a commitment and a promise: to keep the guide rate close to zero for a long period of time, indicated from time to time with precise deadlines.
This approach is finding imitators, and Brazil has also just announced that it will keep short-term rates, which have fallen to historic lows, for an 'extended' period, which analysts estimate at least until the end of the coming year. In truth, the Selic rate, at 7.25%, is far from zero, but for Brazil it is, as mentioned, an all-time low. The large South American country has a tradition of high rates, and inflation, higher than 5% and higher than the Bank of Brazil's target, advises against going further down.
Behind the central bank's decision is the need to stimulate the economy, which grew by just over 2011% in 2012 and 2. Analysts are expecting an almost double growth rate for 2013, close to 4%, also supported by a more expansive budgetary policy. The promise to keep rates at this 'minimum' should also limit the appreciation of the Brazilian real, which has experienced an uncomfortable nominal and real revaluation in recent years.
