Brazil announces new $5.6 billion credit stimulus

People walk past a Caixa Economica Federal bank in downtown Rio de Janeiro August 14, 2014. Banks in Brazil will be allowed to use up to 60 per cent of reserves for credit operations, an increase from the 50 per cent limit announced on July 25. 
People walk past a Caixa Economica Federal bank in downtown Rio de Janeiro August 14, 2014. Banks in Brazil will be allowed to use up to 60 per cent of reserves for credit operations, an increase from the 50 per cent limit announced on July 25. -- PHOTO: REUTERS

SAO PAULO (AFP) - Brazil's central bank said Wednesday it would ease banks' reserve requirements for the second time in less than a month, freeing up US$4.5 billion (S$5.6 billion) to stimulate lending and boost the sluggish economy.

Under the new rules, banks will be allowed to use up to 60 per cent of reserves for credit operations, an increase from the 50 per cent limit announced on July 25.

The bank said the move would free up an additional 10 billion reals (US$4.5 billion) in credit.

It comes on the heels of the July 25 stimulus measures, which the bank said would free up US$13 billion in additional credit.

The manoeuvres come as the clock ticks down to Brazil's October presidential elections.

Incumbent Dilma Rousseff is seeking a second four-year term, but battling to convince voters she can inject new life into an economy that has averaged 2.1 per cent growth during her time in office, down from 7.5 per cent in 2010, the year she won election.

Finance Minister Guido Mantega also announced a new credit programme to boost the real estate sector.