Brazilian Rate Cut

March 12, 2009

The Bank of Brazil website posted a brief statement explaining yesterday’s unanimous decision to cut the Selic interest rate by 150 basis points to 11.25%.  The Bank’s first easing, a reduction of 100 basis points, was implemented on January 22nd, and minutes of this week’s meeting will be published on March 19th, and the next rate announcement will be held in seven weeks on April 29th.  Real GDP fell by the most in a dozen years last quarter, a drop of 3.6% from 3Q, and CPI inflation. In December, monetary officials projected a 4.7% rise of the consumer price index, IPCA, during 2009, and such climbed 5.9% in the year to February.  With GDP now falling sharply, however, officials are likely to revise their price forecast to below the 4.5% target, and so additional rate reductions in the future will surely be forthcoming.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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