It emerged on Wednesday that Brazilian interest rates will be held steady at 11.25%, despite a significant benchmark interest rate cut in the United States, and ailing Brazilian markets.
According to reports, Brazil's Bovespa index dropped 3.32% on Wednesday, alongside drops in other emerging markets. The Brazilian real also declined to 1.825 per dollar on Wednesday, Reuters revealed.
However, the Central Bank's Monetary Policy Committee announced that for the moment, it would hold the country's interest rate unchanged, a decision which has reportedly met with a mixed response, with the cautious approach being welcomed by some industry groups, and criticised by others.
Speaking to Bloomberg this week, Mauricio Oreng, senior economist at Itau Corretora, observed that:
"It would be premature to increase interest rates. Demand is growing very strongly, very close or slightly above the country's potential, and the central bank has to keep monitoring this."
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