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Brazil's central bank cut its target lending rate by 0.5% to an annual 19% on Wednesday, confirming expectations that monetary policy is to be relaxed as inflation comes under control and as Brazil's strengthening currency applies increasing pressure on exporters.

The cut followed a quarter point cut last month - the first since the bank began raising its target rate to fight inflation in September 2004.

The latest cut was bigger than many economists had expected but received only a partial welcome from business groups.

Economic Research Unit
Franklin + Andrews

eru@franklinandrews.com