For the second time in two months, Brazil's central bank increased its prime lending rate, this time by a percentage point to 22 per cent yesterday in a move aimed at quelling inflationary pressures but that may put a further brake on the economy.
This rise will increase the size of the country's large domestic debt burden, nearly half of which is linked to overnight interest rates.
The increase means Brazil's interest rates have risen by four percentage points since October 14. It underscores the economic quandary facing Luiz InŠ±cio Lula da Silva of the leftwing Workers' party (PT) when he becomes president in January.
The central bank's move came amid expectations of sharply rising inflation following months of financial turmoil. Some analysts had been expecting as much as a two-percentage point rise.
