RIO DE JANEIRO: Inflation in Brazil remains high despite some moderation and authorities should remain vigilant to minimize its risks, according to minutes from the central bank's last rate-setting meeting released on Thursday. The central bank raised its benchmark Selic interest rate by 25 basis points to 10.75 percent in the meeting last week, slowing the pace of monetary tightening to avoid hurting a fragile economy.
In the minutes, the bank reiterated that the effects of monetary policy over inflation have a lag, but that its impact is cumulative. It added that there was evidence of tension and volatility in foreign exchange markets.
The central bank, which slashed rates to record lows in 2012, has been forced to add 350 basis points to the Selic since last April to battle a spike in inflation that started to curb consumption in Latin America's largest economy.
Interest rates are now back very close to where they were three years ago when President Dilma Rousseff took office, promising to lower the cost of borrowing.
While central banks from other emerging nations have just started to hike rates to stem a renewed exodus of foreign capital, the Brazilian central bank has signaled its tightening cycle may be coming to an end.
A more stable exchange rate and a slowdown in inflation has reduced pressure on the central bank to keep raising interest rates aggressively.
Although the economy had an unexpected rebound in the last quarter of 2014, activity remained subdued and will likely grow less than 2 percent this year, the fourth year of subpar growth.
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