Central Bank of Brazil Retains 8.75% Selic Interest Rate

September 3, 2009

The monetary policy committee, known as COPOM, left its monetary stance unchanged by unanimous vote.  A pause had been hinted after the prior meeting in July and expected ahead of this week’s meetings.  The last two rate announcements of 2009 set for October 21st and December 9 will also likely leave the Selic rate at 4.5%.  Earlier this year, the central bank’s policy rate was slashed aggressively by 100 basis points on January 21, 150 bps on March 11, 100 bps on April 29 and June 10, and finally by 50 bps on July 22nd.  The total reduction added up to 500 basis points.  That considerable stimulus still fresh in the pipeline is mentioned in a statement released today, which goes on to say that no rate bias presently exists.  Officials believe that the present policy stance will secure in-target inflation of 2.5-6.5% in the medium-term and will promote economic recovery.  Industrial production tumbled 10.9% in the year to June.  Real GDP fell at a 3.3% annualized rate in the first quarter and will likely be negative for 2009 as a whole.  Consumer prices rose 4.5% in the year to July, exactly in line with its target.

Copyright Larry Greenberg 2009.


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