SÃO PAULO--Brazil's central bank on Friday announced measures
intended to boost economic growth by freeing up more money for
banks to loan out.
The central bank reduced the amount of money that banks are
required to keep as reserves from certain term deposits, which
should free up 30 billion reais ($13.5 billion) for lending, the
bank said. The accounts involved currently hold 405 billion
reais.
The bank also loosened reserve requirements for payroll-linked
loans and auto loans, which could add an additional 15 billion
reais.
Brazil's government is trying to improve economic growth ahead
of the presidential elections in October. After expanding 2.5% in
2013, Brazil's economy is expected to grow less than 1% this year,
according to economists.
The central bank's action was applauded by bankers. Economists,
though, expressed concern about what they see as contradictory
signals from the central bank, which is struggling in its battle
against inflation.
"The measures are very important, very positive given the fact
that it came at a moment of tepid economic activity," according to
Luiz Carlos Trabuco Cappi, president of Banco Bradesco SA, one of
Brazil's biggest private-sector banks.
The country's weak economic expansion and a potential weakening
of Brazil's vigorous labor market are among the main threats to
President Dilma Rousseff's re-election campaign, according to
political observers.
Credit growth rates have slowed from about 20% a year as
recently as 2010 to about 10% now due to the weaker economy and the
higher indebtedness of Brazilian families.
"I see it as very positive because it paves the way [for banks]
to expand loans for certain segments" where credit growth had
slowed, said Itau Chief Executive Officer Roberto Setubal.
Others say the moves don't seem to jibe with the bank's efforts
against inflation.
The annual inflation rate had been just under the 6.5% ceiling
of the central bank's target range for much of the year, and the
rate finally hit the upper limit in June.
The bank raised its benchmark interest rate nine times between
April 2013 and last April to try to rein in price increases. In the
minutes of its most recent monetary policy meeting, released
Thursday, the bank emphasized its focus on keeping prices under
control and said it won't be cutting interest rates soon despite
the weak economy.
"It is hard to understand the reasoning behind the changes
announced today that are intended to foster credit operations at a
time when the Brazilian monetary authority tries to tame
inflation," said Jankiel Santos, chief economist at BES
Investimento.
Central bank officials have said repeatedly that current
inflationary pressures aren't coming from the demand side, so
measures that spur lending have no impact in inflation.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com
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