Latin America

Peru raises rates quarter of a point

March 11, 2011 12:28 pm by Emma Saunders

In a “preventative” measure to tackle inflation and inflation expectations, Peru’s central bank has raised rates 25 basis points for the third consecutive month. The reference interest rate now stands at 3.75 per cent.

The move was widely expected given rising – but still moderate – inflation pressures. Annual inflation to February was 2.23 per cent. Month-on-month the increase was 0.38, just below January’s monthly increase of 0.39, which was the highest in two years. The Bank’s target is to keep inflation below 3 per cent. The central bank has indicated that monetary policy remains accommodative at 3.75 per cent, and that 4.5 per cent would be more “neutral”, suggesting further rises lie ahead. There might be a pause at the next meeting, however, given moderate and tempering inflation. Read more

Tags: , , ,
Posted in Uncategorized |

Brazil raises rates 50bp

March 3, 2011 9:54 am by Emma Saunders

Brazil has raised rates half a point to 11.75 per cent, the second rise in three months. Copom, the monetary policy committee, voted unanimously for the raise to rein in inflation. A single sentence accompanied the decision, offering no clues as to the thoughts of policymakers on the future direction.

Prices rose 6.08 per cent in the year to February, above the central bank’s 4.5 per cent target, though within tolerance bands of +/- 2 percentage points. Given the strength of recent inflation, some analysts had expected a three quarter point rise in the selic rate. Significantly, though, food price pressures have receded in Sao Paolo, data showed today. Read more

Tags: , , ,
Posted in Banco de Brasil |

Peru and Colombia both tighten

February 28, 2011 10:14 am by Emma Saunders

Colombia raised rates 25bp late on Friday, the first rise since the financial crisis. The move, which took markets by surprise, takes the Bank’s key intervention rate to 3.25 per cent, compared with 10 per cent before the cuts began. Colombia also said it would continue its $20m-a-day dollar purchasing programme, through which it is trying to dampen appreciation of the Colombian peso.

Peru, meanwhile, yesterday raised its reserve requirement ratio for the second time in two months. The quarter-point rise applies to sol- and dollar- denominated bank reserves and is intended “to keep inflation expectations anchored within the 1 percent to 3 percent target range,” the bank said in a statement, according to Bloomberg. Peru also raised rates in January and February, taking the key rate from 3 to 3.5 per cent since the start of the year. Read more

Tags: , , , ,
Posted in Bank of Colombia |

Chile raises rates 25bp

February 18, 2011 9:45 am by Emma Saunders

The Bank of Chile “continue[s] to reduce monetary stimulus,” raising rates yesterday to 3.5 from 3.25 per cent. Inflation fell last month and is below the 3 per cent target, at 2.7 per cent in the year to January. The trend, however, is strongly upward and recent deflation will be fresh in the minds of policymakers. Last month, Chile held. Read more

Tags: , , ,
Posted in Banco de Chile |

Rate rise mooted in Colombia

February 14, 2011 9:17 pm by Emma Saunders

Rising inflation expectations might push Colombia’s central bank to raise rates from their record low. Minutes released today said that short-term expectations were in the upper half of their target range, while long-term expectations (5 to 10 years) “surpassed the ceiling of that range”. The bullish sentiment was tempered, however, by uncertainty:

The points [the members of the Board] stressed as being fundamental for an eventual hike in the intervention interest rate are, among others, growing upward inflation expectations above the target range, the important momentum in internal demand, high asset prices, and the accelerated build-up in lending.On the other hand, low core inflation levels and the recent relative stability in prices for non-tradable goods, excluding food and regulated items, the possible temporary nature of the increase in food prices, the unstable situation with respect to the sovereign debt of several European countries, and the lack of certainty surrounding the forecasts for inflation and growth in the months ahead were underscored as factors in favor of keeping the rate at its present level. Read more

Tags: , , ,
Posted in Bank of Colombia |
From FT.com January 28, 2011

Alexandre Tombini, Brazil’s new central bank governor, has sought to establish his credentials as an inflation fighter with the release of a tougher-than-expected statement from the central bank. Mr Tombini, a central bank technocrat, replaced established hawk Henrique Meirelles in November. Analysts had feared the appointment might signal a closer relationship between central bank and finance ministry, and, ultimately, less rigour in monetary policy.

In the minutes of the central bank’s policy meeting of last week, released on Thursday, the institution warned about the need to restrain wage growth and public spending if Brazil is to meet its inflation targets. Wage rises were singled out as a particular risk facing the economy. [Bloomberg reports today that consumer, construction and wholesale prices rose 11.5 per cent in the year to January, exceeding expectations.]

“The prospective scenario for inflation has evolved in an unfavourable manner,” the central bank said in minutes from the last copom meeting, at which interest rates were raised 50bp. “The committee notes relevant risks arising from the gap in supply and demand.” Early indications from Ms Rousseff, president, and Mr Mantega, finance minister, suggest they are changing tune on fiscal spending, with both calling for budget cuts to help rein in inflation and the appreciation of Brazil’s currency, the real, against the dollar.

 Read more

Tags: , , , ,
Posted in Banco de Brasil |

Brazil hikes rates to combat inflation

January 20, 2011 10:06 am by Emma Saunders

Brazil has raised rates by 50bp to 11.25 per cent to try to bring inflation back to target. The central bank also introduced new reserve requirements for dollar short sellers recently, in an effort to counter inflationary pressure on the real. Prior to the rise, the selic rate had been on hold for about six months at 10.75 per cent (see chart).

Consumer price inflation ran at 5.91 per cent in the year to December, in the upper end of the target range of 4.5 per cent +/- 2 percentage points. This was the highest since at least December 2008, when the Bank’s historical series begins. Read more

Tags: , , ,
Posted in Banco de Brasil |

Chile holds rates at 3.25%

January 14, 2011 9:41 am by Emma Saunders

Chile has held rates at 3.25 per cent, following its pledge to buy $12bn in the forex market to weaken the peso. Pundits had been split roughly equally between a rate hold and a small rate rise. The central bank has typically been raising rates regularly but by small increments of late (see chart, right).

Inflation in Chile is running at 3 per cent, exactly on target (which allows for one per cent either side of this) – but it is rising quickly. Chile recently pointed to the effect of the Fed’s $600bn stimulus programme on its currency – i.e. causing appreciation – and in doing so, joined a chorus of opposition from emerging markets trying to cope with an influx of “hot money”. Read more

Tags: , , , , ,
Posted in Banco de Chile |
From beyondbrics January 7, 2011

Peru’s central bank caught economists by surprise on Thursday night when it raised its benchmark lending rate from 3 to 3.25 per cent on inflation concerns arising from “international” price rises.

Amid strong inflows of “hot money” that have pushed the Nuevo Sol to a two-year high of about 2.8 per dollar, the seven-member bank board had been holding rates at 3 per cent for the past three months.

The bank said the increase of 25 basis points was now warranted as “a preventive measure” against “the dynamism of domestic demand in an environment of international increases in food and energy prices”. While inflation stood at 2.08 per cent this month, well within the Bank’s target range of 1 per cent to 3 per cent, Peruvians are understandably touchy on the subject, having lived through hyperinflation in the mid-80s.

 Read more

Tags: , , , ,
Posted in Uncategorized |

Brazil targets dollar short sellers to dampen real

January 6, 2011 12:09 pm by Emma Saunders

Banks betting that the real will go up have 90 days to comply with a new reserve requirement from the central bank aimed at weakening the real. The measure is the latest in a series of tools emerging markets are adopting to slow currency appreciation.

Financial institutions with short dollar positions must deposit cash – which will not earn interest – at the central bank. According to the release, the amount is worked out by formula (via Google Translate):

financial institutions should collect the Central Bank in the form of compulsory deposits, 60% of the value of the sold foreign exchange position that exceeds the lesser of: $ 3 billion, or heritage reference (PR). This compulsory deposit will be collected in kind and will not be paid. Institutions will have 90 days to fit the new rule.

 Read more

Tags: , , ,
Posted in Banco de Brasil |
BackOlder entries