“The government has tools to control fuel prices and avoid a negative impact,” Augustin said in an interview today in Brasilia, citing a tax known in Brazil as Cide. “Whatever the international scenario we have ways to avoid damaging the Brazilian economy. We have Cide and we can use it.”
President Dilma Rousseff’s administration is weighing cutting taxes on electricity as well, a person familiar with the discussions said yesterday. The person declined to be identified because he isn’t authorized to speak publicly about the issue.
Brazil’s annual inflation rate rose to 6.51 percent in the year through April, the first time the benchmark IPCA index has exceeded the upper limit of the target range since 2005. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.
The government is relying on a mix of higher interest rates, measures to curb credit and spending cuts in its effort to contain inflation. Central bank President Alexandre Tombini yesterday said that policy makers will increase the overnight rate for a “sufficiently prolonged” period to ensure inflation slows to target next year.
Benchmark Rate
The central bank increased the benchmark interest rate to 12 percent from 11.75 percent in April, after lifting it by half a percentage point at each of its two previous meetings.Petroleo Brasileiro SA (PETR4), the Brazilian state-owned oil company, yesterday said its fuel distribution unit is cutting gasoline prices by 6 percent.
Brazil’s policy of financing industry via the subsidized long-term interest rate offered by the state development bank known as BNDES helps fight inflation, Augustin said. BNDES lending doesn’t hinder monetary policy, he added.
August said the appreciating real is a “extremely big worry” for Latin America’s biggest economy. The real has strengthened 41 percent against the U.S. dollar since the start of 2009, the most among 25 emerging market currencies tracked by Bloomberg.
Brazil Weighs Fuel Tax Cut to Slow Inflation, Augustin Says
By Arnaldo Galvao and Carla Simoes - May 13, 2011 2:03 PM ET
