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Weekly Report - 18 September 2008 (ISSN 1741-7422)

BRAZIL: High consumption boosts growth and inflation

The economy maintained a strong growth rate in the second quarter, despite the international financial crisis. GDP expanded by 1.6% on the first quarter and by an impressive 6.1% on a year earlier - well above expectations. This economic dynamism was mainly a result of strong of domestic demand (consumption and investment). However, the disparity between the rapid growth of consumption and the investment rate in the period has caused concerns, however, not least because it has led to inflation pressures. In response, the central bank lifted the benchmark interest-rate, the Selic, to 13.75% annually on September, the highest level in two years.

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