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Brazil Raises Interest Rates To 11.25%

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http://www.bbc.co.uk/news/business-12234927

Brazil's central bank has raised its key interest rate to 11.25% in a bid to cool inflation in one of the world's fastest growing economies.

The rise, from 10.75%, is the first under President Dilma Rousseff and central bank head Alexandre Tombini, both of whom took office this month.

Inflation was 5.91% last year and is forecast to remain above 5% in 2011.

But the rate rise risks sucking in foreign money, adding to pressure on the already overvalued Brazilian real.

The central bank warned that the rate hike may be just the start of a series of rises to curb inflation.

Capital inflows from outside Brazil have soared as investors flee record-low rates in more developed countries.

The strengthening of the real has hit Brazil's manufacturers hard because their exports have become more expensive.

But Brazil needs to do more to rein in a massive consumer credit boom which has helped fuel the economy's rapid growth.

The economy, Latin America's largest, grew more than 7% in 2010 and is expected to grow between 4.5% and 5% this year.

Pointless it won't help control inflation.

However if your looking for a return on your money sticking it in a Brazilian bank seems like a nice little earner.

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Brazil also took a bit different path than most..

Today, however, Brazil’s level of economic inequality is dropping at a faster rate than that of almost any other country. Between 2003 and 2009, the income of poor Brazilians has grown seven times as much as the income of rich Brazilians. Poverty has fallen during that time from 22 percent of the population to 7 percent...

New York Times

http://opinionator.blogs.nytimes.com/2011/01/03/to-beat-back-poverty-pay-the-poor/

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I was in Brazil in 2003 and distinctly remember the exchange rate being more than 6 reals to the pound. At the time I thought that the currency seemed absurdly undervalued and that I should send money there but never got around to it. The pound has lost more than 50 percent of its value in comparison since then.....

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I remember seeing a TV article about Brazil's property market a year or two of years ago. Apparently at the time it was still booming and unaffected by the global downturn. The reason being given was that it's extremely difficult to obtain a mortgage in Brazil, in fact almost impossible, so people buy houses outright, having saved for years, or borrow from parents to buy. And prices had been kept relatively low by the fact that people had to have all the cash to buy without recourse to mortgages.

Edited by Hyperduck Quack Quack

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11.25% what a dream!....

Probably what you need if real inflation is about 6%. You want something for risk, say 1%. You want to make a profit so say another 1%. Thats 8% you want after tax. If you lose 1/3rd in tax you need a gross of 12% in a 6% inflation world.

Now what is the real inflation rate here? What would banks be lending at if they had to pay a rate that was a real return on money that they borrowed? Who says that house prices have not got a long way to fall?

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http://www.bbc.co.uk/news/business-12234927

Pointless it won't help control inflation.

However if your looking for a return on your money sticking it in a Brazilian bank seems like a nice little earner.

They are like Britain was in the eighties, people don't have debt like they do here and interest rates don't hold as much clout so they have to be more drastic with rate rises than we do. A base rate of 7% in the UK due to the high amount of personal and business debt would have a huge impact on inflation, larger than 11.25% in Brazil.

I have clients in Brazil and one said to me how rich everybody in England was as they all had new cars and expensive things. I laughed and asked him how he paid for his Alpha Romeo sports car in Brazil that he was so proud of, he said cash, the same was for his clothes, TV, HiFi, etc. His house was mostly paid for in cash with a very small mortgage. I then told him that most cars he saw where on HP with houses mortgaged upto the hill on Interest Only Mortgages and all those luxuries paid for by credit cards or on credit schemes. He didn't believe me as thought it was too irresponsible and asked what was going to happen when we retire. This was in 2006, it is now worse for us, and he is doing fine in Brazil, barely noticing the rate rise..

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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