Brazilian Selic Rate Cut to 10.25% from 11.25%

April 30, 2009

The Central Bank of Brazil has implemented its third key rate cut of 2009, a reduction of 100 basis points following cuts of 150 bps on March 12 and 100 bps on January 22nd.  The magnitude of the rate cut matched the most common street expectation.  GDP plunged 13.6% at a seasonally adjusted annual rate in 4Q08 and is believed to have remained negative last quarter.  CPI inflation in March of 5.6% on year was still 465 basis points below the new Selic rate, strongly suggesting that the central bank is not done easing monetary policy.  Brazil’s current account and fiscal deficits each amount to about 2% of GDP, and the real has depreciated about 25% against the dollar during the past 12 months.  Today’s rate cut was agreed unanimously.

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

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