Brazil begins to unwind stimulus
September 30, 2009
By Andre Soliani Rio de Janeiro
BRAZIL'S central bank had taken the first step to dial back stimulus measures because credit markets were "gradually" returning to normal, the bank said in a statement late on Monday.
Banco Central do Brasil tightened the rules for banks to meet reserve requirements by purchasing loans. Now banks can satisfy such requirements by buying loans only from lenders that have no more than 2.5 billion reais (R10.4 billion) in assets, down from a prior limit of 7 billion reais.
To combat the credit crunch that pushed Brazil into recession, the central bank injected about 100 billion reais into money markets to spur economic growth by stimulating loans.
"The central bank is unwinding because the country is no longer in a crisis situation," said Alexandre Lintz, chief strategist with BNP Paribas.
The reserve requirements announced yesterday would not affect liquidity, the central bank said. Record low interest rates and tax cuts helped pull Brazil's economy out of recession. - Bloomberg
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