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“The committee judged that the high level of inflation and the dispersion of price increases, among other factors, contributed to resilience in inflation and required a monetary policy response,” the Central Bank noted.
The inflation was sparked by increasing food prices after poor harvests due to bad weather.
Brazil is ready to take necessary steps, including higher rates, to control inflation, finance minister Guido Mantega said last Friday at an event in Sao Paulo.
BCB President Alexandre Tombini had also signalled on Friday that the benchmark rate will be raised as soon as inflation accelerates above the bank’s target range.
“There is not and there won’t be tolerance of inflation,” Tombini told reporters in Rio de Janeiro.
The Central Bank today in its note also said: “On the other hand, the committee considers that internal and, principally, external uncertainties surround the prospective scenario for inflation and recommends that monetary policy be administered with caution.”
The BRICS Post