Brazil Central Bank: The Sooner Fed Tapers, the Better for World Economy

Tuesday, 10 Dec 2013 11:27 AM

 

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The sooner the Federal Reserve starts to scale back its massive economic stimulus, the smoother the transition will be for the global economy, Brazilian central bank chief Alexandre Tombini said.

Tombini told Brazilian lawmakers that clearer communication by the Fed about tapering its $85 billion-a-month in purchases of Treasurys and mortgage-backed bonds will also help reduce volatility in global markets.

In June, when the Fed first said it was getting ready to withdraw billions of dollars of stimulus, investors rushed to exit emerging markets like Brazil. Latin America's biggest economy saw its currency weaken sharply, fanning inflation.

Tombini said last week that the currency's value going forward will be key to decide on monetary policy.

After raising its benchmark Selic rate for the sixth straight time to 10 percent in late November, the central bank has signaled it could slow one of the world's most aggressive tightening cycles.

© 2014 Thomson/Reuters. All rights reserved.

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