Commodities - The Coming Bull Market Message Board

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Strategies & Market Trends : Commodities - The Coming Bull Market

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To: craig crawford who wrote (459)	7/6/2001 8:11:13 PM
From: craig crawford	Read Replies (1) of 1643

Friday July 6, 1:25 pm Eastern Time Brazilian real drop prompts rate hike consideration biz.yahoo.com By Genevieve Wilkinson NEW YORK, July 6 (Reuters) - As Brazil's currency tumbles and inflation gathers speed, Wall Street is mulling the possibility that the Brazilian central bank may be forced to raise interest rates to stem the tide of money flowing out of Latin America's biggest economy. The Central Bank has been unable to prick the bubble in the real currency -- on Friday it hit a fresh all-time low, sinking 31 percent this year -- despite a 150 basis point hike in the benchmark Selic interest rate and numerous interventions in the foreign exchange market using a $6 billion war chest. Moreover, inflation targets were last week raised a full percentage point to 5.8 percent, propelled higher by an energy crisis and the real's weakness while flaccid U.S. growth threatens Brazil's fiscal stability. While repeated interventions merely line the pocket of speculators -- in the ranks of which Central Bank President Arminio Fraga once belonged -- economists say the bank's next move might be an interest rate hike, not a cut as indicated two weeks ago. ........................................................................................................................ Yet if Brazil keeps raising rates, it risks choking off growth in the $450 billion economy that the government expects to grow 2.8 percent in 2001. ``Brazil should let the real find its natural level,'' one Miami-based fund manager said. ``They could find themselves in a worse predicament if they keep raising interest rates. If the Central Bank overreacts, it gives the market another target to shoot at.''

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