Brazil eyeing to ease hot consumer demand-official

Sun Mar 23, 2008 11:36am EDT
BRASILIA, March 23 (Reuters) - The Brazilian government is studying measures to gradually reduce strong consumer demand in some sectors of the economy and thereby ease inflationary pressure, a government official and media reports said at the weekend.
The idea is to prevent overheating in sectors such as automobiles and steel and thereby reduce the need for the central bank to tighten monetary policy.
"We want to grow without inflation but also without a medicine so strong it would paralyze the economy," a finance ministry source close to policy decisions told Reuters.
Finance Minister Guido Mantega, who is concerned the central bank could throw cold water on a hot economy, is scheduled to meet with industry and bank leaders from Monday to discuss possible measures, the source said.
One of the proposals is to shorten the maturity of car loans from 99 months to 33 months, according to local newspaper reports. The finance ministry is not considering restrictions for the housing market, which is growing without generating inflationary pressure, the reports said.
The central bank said on March 13 that it considered raising interest rates in a bid to anchor inflation expectations, after holding the rate steady four times in a row at 11.25 percent. Its monetary policy committee will meet April 15-16 to decide the future interest rate.
In the 12 months through February, inflation rose 4.61 percent, above the central bank's year-end target of 4.5 percent.
Gross domestic product grew by 5.4 percent in 2007, its fastest rate in three years and President Luiz Inacio Lula da Silva expects faster growth this year.
(Reporting by Isabel Versiani, writing by Raymond Colitt, editing by Richard Chang)