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Brazil Cuts Interest Rate to 5-Year Low

March 29, 2000|Bloomberg News

Brazil's central bank cut interest rates to their lowest level in at least five years, seizing on tame inflation to boost an economic recovery. The bank lowered its target overnight rate to 18.5% from 19%, its first cut since September. The rate is the lowest since Brazil launched its real currency in July 1994. The bank maintained the downward bias on future rate moves that it adopted last week at its policy meeting. That shift enabled bank President Arminio Fraga to cut rates before its April 18-19 meeting without calling an emergency session. Policymakers had waited for signs that the Organization of Petroleum Exporting Countries would boost output to keep a lid on oil prices. High oil prices had been the No. 1 inflation concern for the central bankers, who wanted to cut rates to slash borrowing costs for the government and industry to help economic growth. A drop in international oil prices would likely enable Brazil to avoid following a March 1 increase in state-set oil prices with other rises. Even with the 7% increase, inflation has slowed to an annualized 1.1% in the 30 days through mid-March.

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