Vitor Abdala
Reporter Agência Brasil

Rio - Minister of Finance, Antonio Palocci, declared that rising interest rates is not "capricious" and that the Brazilian Central Bank is not as conservative as some people think it is. According to Palocci there is a very good reason for the country's high interest rates: inflation control.

"Inflation control is our priority. Now it is true that our interest rates are higher than in other countries. But, at the same time, there is no evidence that the rate is higher than it needs to be in order to keep inflation under control," said the minister, as he pointed out that if interest rates were too high inflation would be lower than government targets - which it is not.

Brazil's benchmark interest rate (known as the Selic) has risen steadily month by month since September 2004, until reaching 19.75% per year in July 2005. In August the rate remained unchanged.

Translator: Allen Bennett