News Column

Central bank injects $13.63 bn into Brazil's economy

July 25, 2014



Rio de Janeiro, Jul 25 (EFE).- Brazil's central bank announced a series of liquidity- and credit-boosting measures Friday that it said would inject nearly 30 billion reais ($13.63 billion) into the economy.

One of the key steps was to reduce banks's reserve requirements.

The goal is to increase the amount available to banks for lending so they can lower their interest rates, finance spending by companies and households and help boost the slowing Brazilian economy, which economists predict will grow less than 1 percent this year.

The central bank said compulsory bank reserves had risen from 194 billion reais ($88.18 billion) at the end of 2009 to 405 billion reais ($184.09 billion) at present, and that some of that money could be freed up to boost liquidity.

It also said credit is stagnant in the country even though non-performing loans and the amount of risk in the nation's financial system are at relatively low levels.

To increase the amount of available funds for lending, the central bank will allow financial institutions to use up to 50 percent of their reserve requirements on term deposits to either make new loans or acquire loan portfolios from other banks.

The central bank also increased - from 58 to 134 - the number of banks that can use up to 20 percent of their reserve requirements on loans to finance capital-goods investment.

It also eased minimum capital requirements for loans.

These latest measures mark a change in course for the central bank, which in 2010 took steps to reduce credit and slow consumption in a bid to keep inflation in check.

They also come just days after the bank signaled that it would maintain its benchmark interest rate at 11 percent due to persistent price pressure.

The bank's moves in recent months to raise interest rates, currently as high as when Dilma Rousseff took office as president on Jan. 1, 2011, have made credit costlier and triggered an economic slowdown.

This week, the government reduced its 2014 growth forecast to 1.8 percent, down from 2.5 percent two months ago.

A central bank survey of economists published on Monday, meanwhile, showed that they cut their expectations for Brazilian economic expansion in 2014 for the eighth straight week and now expect gross domestic product growth to come in at 0.97 percent.

After expanding at a 7.5 percent clip in 2010, Brazil's economy grew 2.7 percent in 2011 and 1 percent in 2012 before recovering slightly to grow 2.3 percent last year. EFE

cm/mc


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: EFE Ingles


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters