2 Sep 2011

Brazil unexpectedly cuts interest rate

6:08 am on 2 September 2011

The Central Bank of Brazil has unexpectedly cut its key interest rate to 12% from 12.5%, citing a ''substantial deterioration'' in the outlook for the global economy.

Members of the bank's monetary policy committee voted five to two in favour of the cut on Wednesday.

Rates have been raised five times this year in order to combat rising prices.

The Central Bank said high debt and weaker growth in developed economies could impact on Brazil.

The BBC reports inflation in Brazil is currently running at 6.9%. The economy grew more than 7% in 2010 and is expected to grow by about 5% this year.