50-Basis Point Cut of Brazilian Selic Rate Exceeds Expectations
August 1, 2019
The Central Bank of Brazil’s policy committee, Copom, cut the Selic Rate by a greater-than-anticipated 50 basis points to 6.0% and released a statement that implies but doesn’t guarantee further reductions. Today’s action resumes an easing cycle that ran from October 2016 to March 2018. The Selic rate had been 13.75% when the easing began but had to be interrupted because of a rise in inflation caused by a depreciation of Brazil’s currency, the real. Today’s resumed easing is justified by an improved inflation outlook, rate cuts elsewhere, weak domestic growth, and domestic fiscal reforms.
The Committee deems that the consolidation of the benign scenario for prospective inflation should permit additional adjustment of the degree of stimulus. The Copom emphasizes that communicating this assessment does not restrict its next decision and reiterates 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.
Tags: Central Bank of Brazil
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