Brazil expected to hike key rate

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Brasilia - Brazil's central bank is expected to raise its key interest rate by only 25 basis points to 10.25 percent so as not to affect economic growth, market analysts said Tuesday.

The decision is expected to be announced Wednesday at the end of a meeting of the bank's monetary policy commission (Copom).

But some analysts believe the bank should pursue a more aggressive policy to rein in inflation, with a rate hike of 50 basis points.

In its last five meetings, Copom pushed borrowing costs by 50 basis points but this has failed to contain inflation, which stood at 5.91 percent at year's end, above market expectations.

The inflation rate however closed below the 6.5 percent upper range of the official target.

President Dilma Rousseff, who is tipped to win re-election in polls scheduled for October, pushed for lowering borrowing costs so as to stimulate domestic consumption and investments.

Brazilian fund management firm Economia Concordia noted that the central bank highlighted the poor performance of the Brazilian economy in the third quarter of 2013.

The government and market analysts say the country's GDP growth in 2013 reached 2.3 percent.

This year, analysts are banking on a two percent expansion. - Sapa-AFP

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