Brazil’s central bank said on Friday it would ease banks’ reserve requirements, freeing up US$13 billion to stimulate lending and boost an economy facing its fourth consecutive year of sluggish growth.
The new measures, which would also loosen the rules on lending to small businesses, come as Brazilian President Dilma Rousseff looks to into October elections in which she is seeking a second four-year term.
“The central bank decided to adopt measures to improve the distribution of liquidity in the economy,” the bank said.
It attributed the move to “recent moderation in credit concessions, relatively low levels of default and the reduction of risk levels in the financial system.”
It said there was extra room for maneuver because total reserves in the banking system had risen from around US$87 billion in 2009 to nearly US$182 billion now, including a US$22.4 billion increase in the past 12 months.
Under the new rules, banks would be allowed to use up to 50 percent of reserves for credit operations, new loans and diversified investment portfolios.
The central bank also changed the way it calculates the reserves banks must hold to cover their outstanding loans, basing the amount on the number of payments remaining rather than the total term of the loan.
That could free up an additional US$6.7 billion, officials estimated.
Rules for lending to the small business sector were also eased.
Brazil’s economy registered a growth rate of 7.5 percent in 2010, the year Rousseff was elected to replace her popular predecessor and mentor, former Brazilian president Luiz Inacio Lula da Silva.
However, the economy has since cooled, growing just 2.7 percent in 2011, 1 percent in 2012 and 2.5 percent last year.
Analysts forecast growth of 1 percent this year, with only a minor, temporary boost from hosting the FIFA World Cup, this month and last month.
The central bank is meanwhile fighting to contain rising prices.
Annual inflation came in at 6.52 percent last month, breaking the government’s target ceiling of 6.5 percent. The bank has tried to tame prices by increasing the benchmark interest rate to 11 percent.
However, the new stimulus measures is likely to increase inflation.
“We are seeing contradictory messages from the central bank. On the one hand, they are keeping interest rates high, but on the other hand they are freeing up liquidity,” said Andre Perfeito, the chief economist at investment firm Gradual Investimentos.
The plan could also backfire, he added.
“It’s not so easy. We’ll see if banks want to lend more money or if families and companies want to take it. Business and consumer confidence levels are low,” he said.
Semiconductor business between Taiwan and the US is a “win-win” model for both sides given the high level of complementarity, the government said yesterday responding to tariff threats from US President Donald Trump. Home to the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), Taiwan is a key link in the global technology supply chain for companies such as Apple Inc and Nvidia Corp. Trump said on Monday he plans to impose tariffs on imported chips, pharmaceuticals and steel in an effort to get the producers to make them in the US. “Taiwan and the US semiconductor and other technology industries
SMALL AND EFFICIENT: The Chinese AI app’s initial success has spurred worries in the US that its tech giants’ massive AI spending needs re-evaluation, a market strategist said Chinese artificial intelligence (AI) start-up DeepSeek’s (深度求索) eponymous AI assistant rocketed to the top of Apple Inc’s iPhone download charts, stirring doubts in Silicon Valley about the strength of the US’ technological dominance. The app’s underlying AI model is widely seen as competitive with OpenAI and Meta Platforms Inc’s latest. Its claim that it cost much less to train and develop triggered share moves across Asia’s supply chain. Chinese tech firms linked to DeepSeek, such as Iflytek Co (科大訊飛), surged yesterday, while chipmaking tool makers like Advantest Corp slumped on the potential threat to demand for Nvidia Corp’s AI accelerators. US stock
The US Federal Reserve is expected to announce a pause in rate cuts on Wednesday, as policymakers look to continue tackling inflation under close and vocal scrutiny from US President Donald Trump. The Fed cut its key lending rate by a full percentage point in the final four months of last year and indicated it would move more cautiously going forward amid an uptick in inflation away from its long-term target of 2 percent. “I think they will do nothing, and I think they should do nothing,” Federal Reserve Bank of St Louis former president Jim Bullard said. “I think the
Cryptocurrencies gave a lukewarm reception to US President Donald Trump’s first policy moves on digital assets, notching small gains after he commissioned a report on regulation and a crypto reserve. Bitcoin has been broadly steady since Trump took office on Monday and was trading at about US$105,000 yesterday as some of the euphoria around a hoped-for revolution in cryptocurrency regulation ebbed. Smaller cryptocurrency ether has likewise had a fairly steady week, although was up 5 percent in the Asia day to US$3,420. Bitcoin had been one of the most spectacular “Trump trades” in financial markets, gaining 50 percent to break above US$100,000 and
RSS