Brazil cuts benchmark interest rate
September 7, 2017
On 6 September Brazil’s central bank (BCB) cut its benchmark Selic interest rate by a full percentage point for a fourth straight meeting, bringing the rate to 8.25%
The BCB’s monetary policy committee (Copom), led by BCB president Ilan Goldfajn, voted unanimously to cut the Selic by a full point yesterday as forecasted by the majority of local economists. In the statement accompanying the decision, however, the BCB indicated that it would now start to reduce the pace of its monetary easing policy.
- “Regarding the next Copom meeting, provided the committee’s baseline scenario evolves as expected, and taking into account the stage of the monetary easing cycle, at this time the Copom views a moderate reduction of the pace of easing as appropriate”, a BCB statement reads. “In addition, under those same circumstances, the Copom foresees a gradual ending to its easing cycle”.
- The BCB’s statement suggests that the pace of the its monetary easing policy going forward is set to fall, according to Thais Zara, the chief economist at Rosenberg Consultores Associados. “The central bank is signalling that the next cut will be of 75 basis points”, she said.
- Inflation in the 12 months to August reached 2.46% in Brazil, and economists see consumer prices coming in below the BCB’s target of 4.5% both this year and next. Brazil’s economic growth in the second quarter slowed from the first quarter as investment contracted and the agriculture sector performed poorly.
Looking Ahead: Brazil’s monetary policy may receive a boost following the approval of legislation that phases out subsidised government loans. The outlook for other reforms is also improving as investors bet that possible new criminal charges against President Michel Temer will not be approved by congress.
This feature was provided to EMIA by our editorial partner LatinNews.