The central bank in Brazil has raised its key interest rate to 11.25% from 10.75%, in a bid to cool inflation.
Inflation was 5.91% last year and is forecast to remain above 5% in 2011.
The BBC reports the bank warned that the rate rise may be just the start of a series of rises to curb inflation.
Capital inflows from outside Brazil have soared as investors flee record-low rates in more developed countries.
The strengthening of the real has hit Brazilian manufacturers hard because their exports are more expensive.
The BBC reports the economy grew more than 7% in 2010 and is expected to grow between 4.5% - 5% this year. It is the largest in Latin America.
