Brazil pledges 50bn reais of spending cuts

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President Dilma Rousseff
Image caption,
New President Dilma Rousseff has vowed to get Brazil's spending boom under control

Brazil's government has said it will implement 50bn reais ($30bn; £19bn) of spending cuts in order to curb inflation and help prevent the economy from overheating.

Finance Minister Guido Mantega said all stimulus packages introduced since the onset of the global financial crisis would be removed.

Social spending and infrastructure projects will not be affected, he said.

Last month, the central bank raised interest rates to cool inflation.

It raised rates from 10.75% to 11.25% - the first increase under President Dilma Rousseff and central bank head Alexandre Tombini, both of whom took office last month.

Inflation was 5.91% last year and is forecast to remain above 5% in 2011.

Brazil's economy, Latin America's largest, grew more than 7% in 2010 and is expected to grow between 4.5% and 5% this year.

"It's good news to come out of the Rousseff administration," said Kathryn Rooney at Bulltick Capital Markets.

"This is also positive news for future ratings upgrades." She added that the central bank was now less likely to raise interest rates as many times as it might otherwise have.

However, some analysts felt the new administration should have gone further.

"This is sort of a missed chance because if the government wanted to trigger some positive impact on inflationary expectations, then they should have announced something closer to 70bn reais [of cuts]," said Nick Chamie at RBC Markets.

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