Brazilian Rate Cut, the First Since August 2020
August 3, 2023
The Central Bank of Brazil’s Selic interest rate was cut more sharply than anticipated to 13.25%. Such had been at 13.75% since the last hike in a long tightening cycle was done in August 2022. In all, the rate climbed 450 basis points in 2022 and 725 bps in 2021 from a pandemic base of 2.0% reached in August 2020. Brazilian CPI inflation crested in April 2022 at a 222-month high of 12.1%, had declined to 8.7% by the time of the final central bank rate hike and currently stands at a 33-month low of 3.16%. The explanatory statement following today’s first rate cut in three years stresses “the need to persist on a contractionary monetary policy until the disinflationary process consolidates and inflation expectations anchor around its targets.” The decision to cut the rate by 50 basis points rather than 25 bps was reached by a thin 5-4 vote.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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