SAO PAULO, July 17 (AFP): Brazil's central bank unanimously agreed to hold its key interest rate steady at 11 per cent Wednesday, despite inflationary pressures.
Traders had forecast no change prior to the decision by the central bank's monetary policy commission (Copom) after a two-day meeting.
The decision to hold came despite rising inflation.
June saw a 0.4 percentage points rise which took the headline 12-month rate to 6.52 per cent, above an official target ceiling of 6.5 in South America's largest economy.
Copom said the decision had been taken after "evaluating the macroeconomic outlook and inflation perspectives."
Economist Manuel Enríquez García, from Sao Paulo University's Economics Faculty indicated that the bank "does not know what to do faced with low economic growth and rising inflation."
"The central bank faces a large dilemma: It either acts on inflation or else prejudices economic growth" if it were to raise rates, he told the news agency.
"For now, the central bank is vigilant and is hoping inflation falls over the coming months," hence its decision to sit tight for now, Enriquez said.
Nonetheless, he said the bank might shift position in advance of presidential polls in October when leftist incumbent Dilma Rousseff is favoured to win re-election.
"By then they could raise (rates) in order to dampen down inflation," Enriquez said.
For Alessandra Ribeiro of Tendencias consultants, "the decision of the central bank is correct given the climate of fragile economic activity and low growth."
Ribeiro told Globo television there had been a series of nine rises through to April, adding the inflation situation ruled out the possibility of a rate cut.
Ahead of the Copom meeting, the bank's weekly Focus unit had canvassed some 100 economists and analysts whose call was for no change despite the inflationary pressures.
