Interventions in the Exchange Rate to Help Secure Inflation

BRAZIL ECONOMICS - Report 12 Aug 2013 by Marcelo Gazzano, Cristina Pinotti and Affonso Pastore
The trend for the real to depreciate is continuing. At the start of the year, the exchange rate was around R$2.00/US$ while in recent weeks it only has not broken through the R$2.30/US$ barrier (Graph 1) because of the Central Bank’s interventions, with the sale of exchange rate swaps. Even with a conservative estimate of a pass-through to consumer prices of 5%, this represents an addition to inflation of 0.75%, making the Bank’s job of controlling inflation harder. Graph 1 Exchange Rate – daily figures An important force behind this depreciation is the appreciation of the dollar. But it is...

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