Brazil in unexpected interest rate cut

| September 1, 2011
a�?Brazil

Brazil’s central bank has cut the country’s key interest rate to 12% from 12.5% – a move which surprised economists.

However, the bank said there had been a a�?substantial deterioration” in the outlook for the global economy and that was its reason for the rate cut.

One analyst said the rate cut is a a�?huge mistake” and said the bank could lose credibility as a result.

The bank has lifted interest rates five times this year in a bid to tame rising inflation a�� something which many central banks are doing throughout the world.

Brazil, which is one of the worlda��s fastest growing economies, recently admitted that inflation is spiralling out of control.

Earlier this week, the central bank said inflation will rise to 6.31% by the end of the year – well above the 4.5% midpoint of the banka��s target.

Meanwhile, Brazila�?s economy, which is the largest in Latin America, grew more than 7% in 2010 and is forecast to expand between 4.5% and 5% in 2011.

Former President Luiz Inacio Lula da Silva, said Brazil will become the worlda��s fifth largest economy by 2016.

Finally, the countrya��s unemployment rate fell to an all-time low of 6% in July.

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