MercoPress. South Atlantic News Agency

Brazil's priority is curbing resistant inflation, say central bank minutes

The central bank kept its benchmark Selic rate on hold at 11% for the second straight time last week

Brazil's central bank indicated on Thursday it is unlikely to cut interest rates any time soon and instead is focused on curbing resistant high inflation even as the economy flirts with recession. In the minutes of its last policy meeting, the bank stressed that interest rates at current levels should help ease inflation in coming years.

The central bank kept its benchmark Selic rate on hold at 11% for the second straight time last week, but surprised markets by not clearly spelling out its next policy moves, as it normally does.

In the minutes, the bank ruled out slashing borrowing costs for now.

”The committee anticipates an outlook of resistant inflation in coming quarters, but keeping monetary conditions stable - that is, taking into account a strategy that does not include a reduction of the monetary policy instrument - tends to get (inflation) in the path of convergence toward the goal,” the bank said in the minutes.

Many economists believe the Brazilian economy contracted in the second quarter and that authorities will revise first-quarter figures to show contraction for that period too, which would mean Brazil has slipped into a recession. The national statistics agency is scheduled to release second-quarter gross domestic product data on Aug. 29.

The mix of high inflation and a slowing economy could threaten President Dilma Rousseff's re-election chances. But senior officials recently admitted that curbing inflation is a top priority for the government, meaning that it is too early for the central bank to resume cutting interest rates.