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Montevideo, September 23rd 2018 - 18:44 UTC

Brazil's central bank sounds more flexible on the world's highest interest rates

Wednesday, September 7th 2016 - 17:00 UTC
Full article 5 comments
Last week, the central bank kept its benchmark Selic rate steady at 14.25% for the ninth straight time in a bid to lower inflation that is near 9%. Last week, the central bank kept its benchmark Selic rate steady at 14.25% for the ninth straight time in a bid to lower inflation that is near 9%.
The central bank listed conditions for a rate cut: the persistence of food price shocks, uncertainty on fiscal adjustment measures and a pick-up in disinflation. The central bank listed conditions for a rate cut: the persistence of food price shocks, uncertainty on fiscal adjustment measures and a pick-up in disinflation.

The Brazilian central bank said on Tuesday that future interest rate cuts will not depend on any single factor, signaling that policymakers are ready to ease monetary policy as inflation expectations improve. In the minutes of its last rate-setting meeting, the bank said all members were satisfied with the progress of disinflation, but remained cautious about high inflation expectations for 2017.

 Last week, the bank kept its benchmark Selic rate steady at 14.25% for the ninth straight time in a bid to lower inflation that is near 9%. The central bank then listed conditions for a rate cut, including the persistence of food price shocks, uncertainty around fiscal adjustment measures and a pick-up in disinflation.

The bank also removed previous references to a lack of room to cut rates, as well as a mention to lower private inflation expectations before any changes in policy.

Some analysts, however, interpreted the minutes as signaling that the bank could wait a bit longer to cut interest rates if some of the conditions are not met.

“It is not because some of these factors are materializing that the bank will cut rates. The bank has to be certain that inflation will converge to 4.5% before any cut,” said Alessandra Ribeiro, economist and partner with consultancy Tendencias.

Brazil's president, Michel Temer, has vowed tough economic reforms to rebalance the public accounts and help the central bank slash some of the world's highest interest rates.

Top Comments

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  • Brasileiro

    https://www.youtube.com/watch?v=IT1eNwCgF6c

    Go Brasil!

    Sep 07th, 2016 - 06:19 pm 0
  • Jack Bauer

    @1 Brasshole
    had a change of heart ??? (just fyi, 'BraZil' in English)

    Sep 08th, 2016 - 06:10 pm 0
  • ChrisR

    So what does this all mean?

    More of 'we don't know what to do' it seems to me.

    Having very high interest rates and expecting industrial growth seems the diametrical opposite of what grown-ups would do.

    Sep 08th, 2016 - 07:19 pm 0
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