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Brazil Keeps Interest Rates High

 

By:  The Associated Press
The  New York Times, January 23, 2002

 

Brasilia, Brazil-- Citing a need to curb stubborn inflation, Brazil's Central Bank on Wednesday left its prime interest rate unchanged at 19 percent for the sixth straight month.

Markets had expected the move, after Brazil's main consumer price index came in at a higher-than-expected 0.65 percent in December. That pushed inflation for the year to 7.67 percent, well above the target of 4 percent.

Higher prices for fuel and food are expected to pressure inflation in January. But the government hopes that the pressure will ease with the recent deregulation of Brazil's fuel sector and lower taxes on fuels.

Brazil's inflation target this year is 3.5 percent, with a ceiling of 5.5 percent.

In 2001, Brazil's currency slumped amid a domestic energy crisis and contagion from the economic crisis in neighboring Argentina. The decline of the real pushed up prices, and the government responded by raising interest rates to cool demand and keep inflation in check.

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