Reuters: US Dollar Report: UPDATE 1-Brazil central bank signals it may be done with rate cuts

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UPDATE 1-Brazil central bank signals it may be done with rate cuts Sep 6th 2012, 12:39 Thu Sep 6, 2012 8:39am EDT * Any extra rate cut should be done with "maximum" caution * Spike in food prices pose short-term inflation risks * Bank to remain vigilant on short-term inflation BRASILIA, Sept 6 (Reuters) - Brazil's central bank signaled it could be wrapping up a year-old campaign of interest rate cuts, noting that a recent spike in food prices posed inflationary risks in the short-term, minutes of its last monetary policy meeting said on Thursday. The bank said in the minutes that any additional interest-rate cut should be done with "maximum" caution, its clearest hint yet that the easing cycle could be over or near its end. The bank cut its benchmark Selic rate for the ninth straight time to an all-time low of 7.5 percent on Aug. 29 to bolster Latin America's largest economy. The bank's Monetary Policy Committee, known as Copom, expects a recent jump in commodities prices to be less intense than a similar situation in 2010 and 2011, the minutes said. "Copom reaffirms its view that monetary policy should remain vigilant to ensure that pressures detected at shorter horizons do not spread to longer horizons," the bank said in the minutes, hinting more concern over quickening inflation. Still, the bank said that the 12-month trailing inflation trend is seen converging toward the center of the official target range. Inflation has surprised on the upside as higher food prices in August stoked inflation to its fastest pace for that month in five years. Since July, 12-month inflation has also reverted its downward trend, moving away from the center of the official target of 4.5 percent. At 5.24 percent, annual inflation remains below the target ceiling, but may add pressure on the central bank to end an aggressive rate-cutting campaign, which has trimmed 500 basis points off its benchmark Selic rate since August. After a year of aggressive rate cuts and more than a dozen government stimulus packages the Brazilian economy is finally showing some signs of life. Still, even with that massive stimulus, the economy is seen growing less than 2 percent this year, much slower than 7.5 percent expansion posted in 2010. Link this Share this Digg this Email Reprints

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