Brazil raises interest rates to battle dollar and inflation

Brazil has raised interest rates sharply, following China, India and host of countries across the emerging world in acting to curb inflation and counter the flood of dollar liquidity from the US.

Alexandre Tombini, the new head of Brazil's hawkish central bank, kicked off his tenure by raising the key Selic rate a half point to 11.25%, despite fears that this will push the over-valued real to extreme levels, according to the Telegraph. Brazil faces an acute dilemma since high rates have made it the darling of the global "carry trade", attracting US, European and Japanese funds chasing yield. The country's trade deficit doubled last year to $71bn, and there is evidence that the strong real is letting Asian exporters eat into Brazil's industrial base. Goldmans to lift £1m cap...