Latin American Economy & Business - March 2013 (ISSN 1741-7430)

Not many central banks in the world are increasing official interest rates – or giving the impression that they are seriously thinking about doing so. However, the April 12 meeting between the Banco Central do Brasil (BCB)’s Governor Alexandre Tombini and Brazil’s Finance Minister Guido Mantega indicated that the central bank will move to increase the key Selic rate in order to curb inflationary pressures in that country. This decision appears all the more remarkable because it comes at a time that a fair amount of high frequency data has been pointing to a slowing of activity in Latin America’s largest national economy. However, the situation is more complex. As we explain in the Regional Economic Review, there are actually many signs that activity has been, and remains, quite resilient in Brazil. The authorities' move to restrain inflationary pressures and expectations is reasonable and well timed.

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