Brazil may have to rethink savings returns-cen bank

Sun Apr 5, 2009 4:38pm EDT
BRASILIA, April 5 (Reuters) - Brazil may have to change the way it calculates the returns on personal savings as interest rates move lower, Brazil's Central Bank President Henrique Meirelles said in an interview published on Sunday.
Brazil's central bank cut interest rates 250 basis points to 11.25 percent since the beginning of the year and is expected to continue to ease monetary policy to revive the economy.
But some fear more aggressive monetary easing will reduce returns on financial investments and make savings more attractive for investors. They worry this will limit the circulation of liquidity in the economy, already suffering from tight credit markets.
"We can't have a fall (in interest rates) for loans and at the same time say there can't be a fall in certain investments," Meirelles told O Estado de Sao Paulo newspaper.
Asked whether the referential rate used to calculate returns on personal savings could be changed, he said: "It could be a solution, depending on what happens in the long-term."
Meirelles reiterated the central bank expects Latin America's largest economy to grow 1.2 percent in 2008, below the government forecast for 2 percent growth, but above market predictions for a stagnant economy this year. (Reporting by Ana Nicolaci da Costa, editing by Maureen Bavdek)