Brazil increases Lace $ 36 billion removed from circulation

Brazil's central bank raised reserve requirements on cash deposits and time to reduce consumer lending growing 20 percent a year and prevent a credit bubble. Future interest rate reduced yields.

The reserve requirement on time deposits was raised to 20 percent from 15 percent and an additional requirement for cash deposits will increase to 12 percent from 8 percent, according to a statement distributed today in Brasilia. Banks will be forced to use more capital for consumer loans to exceed 24 months. Eliminate higher minimum reserves of 61 billion reais (U.S. $ 36 billion) economy.

Central Bank President Henrique Meirelles, said the measures would bring the reserve requirement to a level that is slightly stricter than before the global credit crisis of 2008. He said the move will help slow inflation, prompting traders to reduce bets that the central bank will raise interest rates this month for the first time since July of 10.75 percent.

"It would be prudent not to dissociate these macro-prudential measures of conventional monetary policy actions," Meirelles told reporters in Brasilia. "They are complementary channels used in different situations."

Yields on interest-rate futures traded in Sao Paulo fell. The yield on the contract in January 2011, the most traded today, down 12.6 points, or 0.126 percentage points to 10.713 percent at 6:21 am New York time.

Small Rate Increase

"There is a greater chance now that rising interest rates will not be in December," said Marina Santos, chief economist at Squanto Investimentos SA in Sao Paulo. "The rate increases will be smaller too."

increases in consumer prices as measured by the IPCA-15 index, accelerated to 5.47 percent in the year to mid-November. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.

eighth largest in the world economy will expand 7.55 percent this year, its fastest pace in more than two decades, according to a central bank survey of about 100 economists published Nov. 29. The same poll showed economists expect the central bank to raise benchmark interest rate by 150 basis points, or 1.5 percentage points next year, starting with an increase of 50 basis points in April.

"Macroeconomic Implications"

"While these precautionary measures in nature, one can say with a reasonable degree of certainty that have macroeconomic consequences, which has an impact on the credit market in its quantitative dimension and also through prices," Meirelles said .

Brazil's retail sales grew for the fifth consecutive month in September on record unemployment and credit growth. Sales rose 0.4 percent in September from August and increased 11.8 percent over the previous year, exceeding the forecast of 11.1 percent of the median of 30 economists surveyed by us. Unemployment fell to 6.1 percent in October.

Credit outstanding rose 1.9 percent in October from September to a record 1.64 billion reais ($ 950 million), led by a 3 percent increase in mortgage loans to 129 million reais. Credit rose to a record 47.2 percent of GDP, from 46.7 percent in September.

"We have very hot domestic demand, and has to do with bank loans," said Zeina Latif, an economist at RBS Securities Inc. in Sao Paulo. "Bank lending to consumers is too strong, fast growing, with no signs of slowing down."