Full Percentage Point Reduction of the Brazilian Selic Interest Rate

April 12, 2017

The monetary policy committee at the Central Bank of Brazil, known as Copom, cut the Selic rate to 11.25% from 12.25%. This larger incremental cut after ones of 75 basis points in both January and February and 25 bps each last October and November was deemed appropriate according to a released statement. Analysts were anticipating a 100 basis point rate reduction and the unanimous vote that approved such. Copom projects a gradual recovery from Brazil’s deep and long recession. Policymakers also observe more widespread disinflation in Brazil’s economy and falling expected inflation. They believe that Brazil is on course for inflation to settled around the target of 4.5%, but note that upside and downside risks associated with the forecast are more or less balanced. Today’s decision was “without bias” according to the statement. Further rate cuts are not pre-determined but appear likely to happen if Brazil’s economy evolves along the lines of the baseline projection.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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