Another Brazilian Central Bank Rate Cut

February 22, 2017

Brazil’s monetary policy committee known as Copom has reduced its Selic interest rate by 75 basis points for the second time in six weeks, and as in January the decision today was made unanimously. In conjunction with 25-basis point reductions last October and November, the Selic rate of 12.25% now stands two whole percentage points below the peak of 14.25% seen during the final five months of 2015 and at the lowest level in two years.

A statement released by Copom today suggests that about about another 175 basis points of easing is likely during the balance of this year. The statement calls recent inflation developments “favorable,” noting more widespread evidence of disinflation. Inflation expectations by end-2017 are consistent with the 4.5% target. Growth data have been mixed lately, suggesting a turning point after a severe recession. However, the statement also observes that the forecast faces significant external uncertainties.

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



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