A lot of eyes are on Brazil as JPMorgan strategist Ben Laidler noted the largest economy in Latin America is at risk of overheating, and their currency is also considered overvalued.
After cutting interest rates to 8.75 percent, along with shrinking taxes to help stimulate their economy out of recession, inflation has been increasing in Brazil with expectations there will be changes in efforts to combat it.
Brazil’s economy has picked up in a big way, growing 2 percent in the last quarter of 2009 over the quarter before. That’s the fastest economic growth in Brazil in two years.
Over the last year the Bovespa stock index has exploded upwards by 61 percent while the real has surged by 23 percent during that same time period.
Concerns from Brazilian policy makers is inflation could increase far beyond the average of their target range, according the release of the minutes from their latest meeting on March 16-17.
For the inflation itself, as it relates to consumer prices in Brazil, they increased by 5.09 percent for the twelve month through the middle of March. For the end of 2010 the inflation rate has been projected at 5.1 percent, which could now reach far beyond that if things don’t slow down, which is of course the concern of and challenge to Brazilian officials.
Officials at the central bank of Brazil have a goal of 4.5 percent for inflation, something already surpassed and expected to be exceeded over the next year.