Brazil raises rates to battle inflation

Brazil’s central bank has raised its main interest rate by 50 basis points to 9 per cent in an effort to tame inflation and restore investor confidence.

It is the fourth consecutive increase in interest rates in Brazil and comes as its currency, the real, has declined sharply against the dollar. This has raised the price of imports and kept inflation high at 6.3 per cent.

The central bank wants to keep inflation below 6.5 per cent and has targeted a level of 4.5 per cent as ideal.

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South America’s biggest economy has been dogged by slow growth in recent years.

Economic growth has collapsed from 9.3 per cent in the second quarter of 2010 to 1.9 per cent in the second quarter of 2013, although growth has been ticking up slowly since the middle of 2012. Brazil’s economy is forecast to grow by 2 per cent in 2013.