Brazil’s Central Bank voted for the second consecutive month to hold interest rates constant at 19.75%, which remain among the highest in the world. The Central Bank continues to target inflation in conducting its monetary policy. Specifically, it is aiming for 2005 and 2006 inflation targets of 5.1% and 4.5%, respectively. However, Brazil’s ultra-tight monetary policy may be counter-productive, as certain foreign investors continue to pour ‘hot money’ into Brazil’s economy in order to take advantage of the unnaturally high interest rates. If economists are correct in their estimates, the Central Bank will fail to meet its respective inflation targets for the next couple of years, which means current interest rate levels will likely endure in the foreseeable future.

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