Brazilian real appreciates after central bank holds rates
The Brazilian real gained against the US dollar on September 3, 2015, after the Central Bank of Brazil announced the previous day that it will keep interest rates on hold. The real has been among the worst performers across major economies around the world, reeling under the pressure of rising inflation and declining commodity prices.
A slowdown in China amid depressed global demand has also been weighing on the real. The real touched 3.8 levels against the US dollar. The political scenario also remains shaken as Brazil’s President Dilma Rousseff faces impeachment.
Selic rate will be kept high to pull back inflation
The Central Bank of Brazil ended a string of seven consecutive hikes in the interest rate, also known as the Selic rate, by keeping it on hold at 14.25%. The central bank has been fighting vigorously against soaring inflation levels that stand at 9.56% in the month of July. Brazil holds the highest benchmark interest rates among the top ten major economies of the world. The bank said it plans to keep the rates high for a sufficiently prolonged period of time to pull inflation levels downward toward the target level of 4.5%.
Impact on the market
Gerdau SA (GGB), however, ended negatively at -1.85% at the end of the day after making a big upward move of 10.20% the previous day.