Persistent inflation keeps Brazil interest rates high: central bank

Persistent inflation leaves little room for Brazil's central bank to lower the basic interest rate, the bank said Thursday.

A report on the latest meeting of the bank's Monetary Policy Committee (Copom) said it was maintaining the interest rate at 14.25 percent.

The Copom meeting last week -- the last to be headed by outgoing bank President Alexandre Tombini, who was replaced by Ilan Goldfajn -- unanimously agreed to keep the interest rate at its current level.

According to the Copom, inflationary pressures are being caused by temporary setbacks in food supply, as well as the adjustments being made due to the differences between domestic and foreign prices, and between government-controlled and free-market prices on energy and fuel.

The process of readjusting prices is more protracted and complex than expected, in addition to which "uncertainty about the global economy remains," the committee said.

Brazil's benchmark interest rate is the main tool for keeping inflation under control.

The National Monetary Council established a target inflation rate of 4.5 percent for the year, with a two-point margin up or down that leaves the upper limit at 6.5 percent.

Brazil's financial institutions are predicting the inflation rate will break through that ceiling to register at 7.19 percent by the end of this year.

Despite making some progress in fighting inflation, uncertainty surrounds the interim government's efforts to improve public-sector finances and lower the deficit, the committee said.

The Copom said it will take the necessary steps to drive down the inflation rate to the stated target of 4.5 percent for 2017. Enditem