A Greater-than-Expected 50-Basis Point Selic Rate Cut in Brazil

March 18, 2020

Copom, the interest rate policy-making committee at the Central Bank of Brazil had previously cut its Selic rate five times since last July. While the first four reductions were by 50 basis points each, the increment was halved to 25 basis points at last month’s review, and this had analysts anticipating another 25-basis point cut this time as well especially since growth and inflation have been within expectations. However, the Covid-19 pandemic has elevated uncertainty and elicited pre-emptive monetary stimulus at other central banks around the world. A released statement observes, “the novel coronavirus pandemic is causing a significant global growth slowdown, a fall in commodity prices, and an increase in asset prices volatility. With this background, the environment for emerging economies has become challenging, despite the additional provision of monetary stimulus in major economies; ┬áData on economic activity released since the previous meeting remains in line with the process of the gradual recovery of the Brazilian economy. However, these data do not yet reflect the impact from the COVID-19 pandemic.” The Selic rate will now be 3.75% compared to 6.0% at mid-2019.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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