Central Bank of Brazil Cuts Selic Rate by 100 Basis Points

January 21, 2009

The Brazilian central bank rate was lowered to 12.75% from a cyclical high of 13.75%.  The drop was twice as much as expected and yet another example of front-loaded monetary stimulus.  The easing was made in response to an export-led softening of economic growth, steep declines in the stock market, deterioration in the labor market, and the restoration of in-target inflation.  The benchmark interest rate remains far higher than on-year inflation of 5.9%, leaving scope for more rate cuts later in 2009.

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