Brazil Gets a Fourth Rate Cut

January 18, 2012

Copom, the policymaking committee of the Bank of Brazil, cut the Selic central bank interest rate by 50 basis points to 10.5%.  This unanimously decided move follows similar half-percentage point reductions announced last August 31, October 19, and November 30.  Slightly more than half of the 375 basis points of tightening from April 2010 through July 2011 has now been reversed.  Today’s "moderate adjustment in the level of the basic rate", like the earlier three cuts, was taken "to mitigate the effects from a global environment more restrictive," and officials are confident that the action "is consistent with the inflation convergence scenario for the goal in 2012."  Brazilian GDP rose only 2.1% in the year to 3Q11, and the World Bank is predicting growth this year and next of 3.4% and 4.4%, respectively.  Copom is targeting a range for CPI inflation in 2012 of 2.5 – 6.5%.  In November, inflation was marginally higher than 6.5%.

The next two meetings of Copom are scheduled for March 6-7 and April 17-18.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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