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Slower economy justifies Brazil's rate cuts - Tombini
2012年5月13日 / 晚上8点47分 / 6 年前

Slower economy justifies Brazil's rate cuts - Tombini

* Central Bank chief reiterates independence from government
    * Says economy in warm-up phase, stronger in 2nd half of yr
    * Won't use macroprudential measures to avoid rate hikes

    RIO DE JANEIRO, May 13 (Reuters) - Brazil's interest rates
are falling because economic conditions allow it to ease
monetary policy and not because of any pressure from the
government, Central Bank President Alexandre Tombini said in a
newspaper interview published on Sunday.	
    Tombini told O Estado de Sao Paulo that Brazil's economy,
which almost slid into recession in late 2011, is entering a
warm-up phase and should pick up steam in the second half of
2012, but a recently worsened outlook abroad will hurt exports.	
   The central bank governor has been fending off accusations
lately that he had yielded to pressure from the administration
of President Dilma Rousseff to lower rates and speed growth when
he embarked on an aggressive series of interest rate cuts.	
    The bank has trimmed 350 basis points off its Selic
benchmark rate since August and hinted it could cut rates to
record lows as inflation eases and the economic recovery remains
weak. The rate is currently at 9 percent, only 25 basis points
above the record low.    	
    "The Selic is falling, leading to a significant reduction in
the real interest rate, because of a specific combination of
internal and external factors and not to please President
Dilma," Tombini told O Estado de Sao Paulo.	
    That dovish stance is at the heart of Rousseff's drive to
revive an economy that is still struggling to recover.	
   	
  Tombini told the paper the bank would not hesitate to raise
rates again when necessary. But he said any future increases
would occur in the context of lower real interest rates, or
rates adjusted for inflation, which he said would stay lower.	
    Brazil's government has pushed hard this year for banks to
cut the cost of loans by trimming the margins they earn on them.
The government said their spreads were among the world's highest
and held back economic growth that it is now trying to rekindle.	
    Banks, led by the state-controlled Banco do Brasil
 and Caixa Economica, have lowered margins in
response but argue that their spreads were justified by the high
costs they face as well as rising loan defaults.	
    	
    WARM-UP PHASE	
    Tombini told the newspaper that the economy was now in a
warming-up phase that would eventually reduce loan defaults. He
described economic growth of 4 percent as satisfactory for the
country, and said 2010's blistering 7.5 percent growth was more
an anomaly than a reflection of Brazil's true potential.	
    He said the economy would grow more in the second half of
this year than in the first.	
    Latin America's biggest economy grew only 2.7 percent last
year as its manufacturers struggled under the weight of a
stronger currency that has triggered an avalanche of cheaper
imports from emerging market peers like China and Mexico.	
    The government aims to achieve growth of no less than 4
percent this year, while a weaker currency, which has lost about
5 percent of its value against the dollar this year, is now
helping by making export-focused industries more competitive.	
    Tombini ruled out resorting to macroprudential measures to
avoid raising interest rates as they were best used for managing
imbalances in financial and credit markets rather than the
broader economy. He said adjustments to the benchmark Selic rate
remained the best way to control inflation while such imbalances
were absent.	
    Tombini described the Brazilian economy as solid, with $374
billion in international reserves and net public debt of around
36 percent of GDP. He said the recent weakening of the Brazilian
currency, the real, had also helped to reduce overall debt,
since Brazil is a net creditor in dollar terms.

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