Brazil central bank to hike key rate to 10%

Brazil's central bank is set to hike its  base rate half a percentage point Wednesday to tame high inflation against a background of sluggish economic growth, according to market analysts. The decision to push the rate to 10 percent is to be announced at the end of a two-day meeting of the bank's Monetary Policy Committee -- its last this year -- which opened Tuesday. The rise will come barely 11 months before presidential elections in which President Dilma Rousseff is tipped to win re-election. It will mark the sixth consecutive rate increase this year in an adjustment cycle begun last April. The bank's priority is to keep the lid on inflation, which in June reached 6.7 percent on an annualized basis, above the 6.5 percent upper limit of the official range. "Inflation has been stabilized. This is good news. But the current level of 5.8 percent is still high" compared with the official range of 4.5 percent, said Francisco Lima Goncalves, chief economist at Banco Fator. Rousseff had pushed for lowering the rates, among the highest in the world, but the central bank was forced to bring them back up in the face of soaring inflation. The country's GDP grew a modest 0.9 percent in 2012. The government and market analysts are banking on a 2.5 percent expansion this year and 2.1 percent in 2014.