Brazil's cenbank chief says economy out of crisis

Sat Jan 30, 2010 12:42pm EST
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DAVOS, Switzerland (Reuters) - Brazil's economy is returning to normal and no longer needs so much fiscal stimulus, Central Bank President Henrique Meirelles said on Saturday.

Meirelles told Reuters the government's plan to phase out tax cuts and tax breaks introduced to combat a recession in Latin America's biggest economy was appropriate.

"I think it's a proper move, the Brazilian economy is now out of the crisis," he said on the sidelines of the World Economic Forum in Davos.

"We are going to a situation which is business as usual and I think this is a proper moment to withdraw fiscal stimulus."

Brazil exited a six-month recession last year ahead of many more developed economies. The country's benchmark Bovespa stock index .BVSP surged 83 percent in 2009, while its currency, the real, strengthened 34 percent.

Meirelles said the central bank was considering whether to increase the level of reserves banks must keep, a step which would reduce the amount of liquidity available.

The central bank lowered the reserves level during the crisis, a change which is due to expire at the end of March.

Options under consideration are keeping reserves at their current lower rate, returning to the pre-crisis level or even increasing the levels further, Meirelles said.

"There (is) no commitment one way or the other, going back to the old level, keeping the present level, increasing somewhat -- there is no commitment and we will analyze that in due time."   Continued...