Central Bank of Brazil Cuts Key Interest Rate for a Third Time

November 30, 2011

Central banks tend to cut interest rates faster than they raise them, and Brazil’s committee of policymakers known as COPOM is no exception.  During a six-month period from January 2009 to July 2009, the Brazilian Selic Rate was slashed by 500 basis points to 8.75%.  Subsequent tightening stretched over 15 months from April 2010 to July 2011 and cumulated to 375 basis points.  Most recently, the Selic rate has been reduced by a half-percentage point each on August 30, October 19, and today — a drop of 150 basis points over the span of two months.  Like other central banks where rates have been cut lately, these moves come against the backdrop of worsening global growth prospects, funding strains in Europe, and mounting fear that the euro debt crisis may engulf many developing economies as well as those that are advanced.  Brazil’s inflation rate, although above the 6.5% target ceiling, seems to have crested, and its economic activity has slowed.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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