Brazil’s Central Bank Injects Billions into Economy

Brazil’s central bank, Banco Central do Brasil, said that it plans to reduce the amount of money commercial banks keep in reserve, in a bid to revive the country’s economic growth.

According to the
Financial Times
, the measure will free up as much as 45 billion reais (BRL) – equivalent to US$20.2bn – although other reports suggest that the figure is nearer BRL30bn for lending to businesses and individuals.

The announcement comes less than three months before presidential elections, with president Dilma Rousseff due to seek a second four-year term in October. When she was elected in 2010, Brazilian gross domestic product (GDP) grew by 7.5%, but fell back to 2.7% in 2011 and 1% in 2012. While last year saw a modest revival to 2.5%, the 2014 figure is currently estimated at only 1% against a government forecast of 1.8%.

“The central bank decided to adopt measures to improve the distribution of liquidity in the economy,” the bank announced.

The new rules permit Brazil’s banks to use up to half of their reserve requirements on term deposits to boost credit operations or to purchase loan portfolios from eligible financial institutions.

The central bank also nearly tripled the number of institutions eligible under that programme, from 58 to 134 and, in a separate announcement, adjusted minimal capital requirements for retail credit operations.

5 views

Related reading

trump-and-clinton
ap_moller_maersk
bank-of-japan
us-business