Development: On 5 May after a meeting with her German counterpart Christian Wullf, Brazil's President Dilma Rouseff was again critical of developed countries' "expansionary liquidity policies" and reiterated the Brazilian authorities' commitment to resisting inflationary pressures.

Significance:  Reining in inflation is now Rousseff's top priority. There is a slight change of tactics going on at the central bank of Brazil (BCB). First, it acknowledges that inflation, expected to breach the target ceiling of 6.5% year-on-year from April, will not return to target until 2012. Equally, policymakers have also decided that there is no point in battling the strong Real and are instead seeking to use it to tackle inflation via imports of cheaper consumer goods to ‘complement'  the internal market. That pits them against domestic industrialists, who are screaming about de-industrialisation. The BCB president Alexandre Tombini yesterday called on consumers to save, not spend, advising them to take advantage of the country's high interest rates.

Key points:

• There are fears that policymakers are running out of options after a raft of so-called macro prudential measures since late last year have largely failed to deter speculative capital inflows, stem domestic credit growth, cool inflationary pressures or ease the fierce appreciatory pressure on the Real.  The authorities are now desperately trying to ensure a soft landing for the economy.

• Key officials including Finance Minister Guido Mantega,  Development Minister Fernando Pimentel and the head of the national development bank Luciano Coutinho, all believe that there is "nothing to be done" about the strong Real this year, especially given the weak US dollar. Mantega recently told the senate that the government would not permit the overvaluation of the Real but emphasised that "it's not such an exceptional rate, taking into the account the economic fundamentals". Reading between the lines, it seems that although the central bank will continue to intervene as needed in support of the Real (as per its managed float policy), it won't do anything radical and the authorities are willing to let it settle at the ‘informal floor' of R$1.60/US$.

• Mantega also denied that the government is considering a quarantine on capital inflows, hinting that he sees the IOF (financial transactions) tax on foreign fixed income investment (currently at 6%) as the best defence against hot money.