Brazilian Selic Interest Rate To Stay at 8.75%

March 17, 2010

A narrowly split 5-3 vote by the Central Bank of Brazil’s policymaking committee, COPOM, decided to keep the key Selic rate at a record low 8.75%.  Analysts had also been divided over whether an initial rate increase might occur this month in light of a strengthening recovery and higher inflation in the early going of  this year.  CPI inflation of 4.8% in February was up from 4.3% last year and no different from the level when the last of five rate reductions was made in July 2009.  That cut had amounted to 50 basis points and followed cuts of 100 bps in January 2009, 150 bps in March, and 100 bps each in April and June.  Officials expect inflation to be close to its 4.5% target in 2010.  As the next policy meeting on April 27-28 nears, speculation about the onset of tightening will likely pick up.  The Brazilian real is some 1.7% softer against the dollar since end-2009 but more than 30% stronger than its year-ago value.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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