Brazil bank lending rises, despite tighter credit

BRASILIA: Brazilian bank lending rose in May from April despite government efforts to clamp down on credit and slow above-target inflation.

Outstanding loans in Brazil's banking system rose 1.6 percent in May from the previous month, the central bank said on Tuesday.

Loan delinquencies as a proportion of total loans, or the average loan default rate, edged up to 5.1 percent from 4.9 percent in April.

Relatively easy credit last year helped fuel economic growth of 7.5 percent, making Brazil stand out among major economies.

But the surge of credit helped push inflation to a six-year high of 5.91 percent by the end of 2010. Inflation has since reached 6.55 percent in the 12 months through May, just above the top of the central bank target range.

To clamp down on consumer price pressures, the central bank has raised interest rates four times this year, most recently a hike to 12.25 percent from 12 percent in June.

Policymakers have used other tools, such as limiting how much banks can lend.

Inflation has showed recent signs of slowing, with policymakers saying they expect the 12-month rate to move closer to the target by year-end.

Copyright Reuters, 2011