Central Bank of Brazil

May 31, 2017

Brazil’s monetary policy committee, known as Copom, just reduced its Selic interest rate by a full percentage point to 10.25%. This was the fourth cut of 2017 and matched the size of the prior reduction in mid-April. Cuts of 75 basis points each were made in January and February. Two cuts of 25 basis points were also implemented in the final quarter of 2016. The decision was decided by a vote of 9-0. The Selic rate had been steady at 14.25% from July 2015 to October 2016 after having been slashed by 325 basis points from 17% during the prior twelve months.

A statement released by Copom predicts that if economic and inflation trends evolve as officials expect, the Selic rate will be lowered another 175 basis points over the rest of 2017 and then hold at 8.5% during 2018. Inflation is receding and expected inflation is projected to hover near the 4.5% target in 2018 and 2019. Brazil is emerging from a severe recession and faces fresh uncertainty from a new domestic political scandal.

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

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