Third Brazilian Rate Cut of the Cycle

October 30, 2019

The Central Bank of Brazil’s Selic Rate was cut 50 basis points to 5.0%. The decision was unanimous and followed 50-bp reductions announced July 31 and September 19. In a released statement, the policymaking committee characterized core inflation as comfortable.

The Committee judges that this decision reflects its baseline scenario for prospective inflation and the associated balance of risks, and it is consistent with convergence of inflation to its target over the relevant horizon for the conduct of monetary policy, which includes 2020 and, to a lesser extent, 2021…. The Committee deems that the consolidation of the benign scenario for prospective inflation should permit an additional adjustment of the same magnitude. The Copom judges that the current stage of the business cycle recommends caution when considering possible new changes in the degree of stimulus. The Committee reiterates that communicating this assessment does not restrict its next decisions, and emphasizes that the next steps in the conduct of monetary policy will continue to depend on the evolution of economic activity, the balance of risks, and on inflation projections and expectations.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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