Inflation kick in the BRICS

21 January 2011 By Ian Campbell

Consumer prices are rising across emerging economies and interest rates are following. Borrowing costs are rising in Asia, Brazil’s overnight rate is over 11 percent and Russia should move. For highpriced emerging market equities, the tightening of liquidity is a threat.

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Brazil's central bank increased the benchmark Selic interest rate by half of 1 percent to 11.25 percent on Jan. 19 and suggested that it intended to raise rates further.

Alexei Ulyukayev, the first deputy chairman of Russia's central banks, said on Jan. 20 that meeting its 6 percent to 7 percent 2011 inflation target would be "very difficult." He added that a "moderate rate of rouble appreciation wouldn't be harmful" and that there was a need to be "careful with fiscal spending." The central bank raised deposit rates by 25 basis points in December, to 2.75 percent.

Turkey's central bank cut its policy rate by 25 basis points to 6.25 percent on Jan. 20, having previously cut the rate by 50 basis points in December. The central bank said that banks' reserve requirements would be raised again.

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