Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Brazil Cuts Rates and Leaves Options Open for Next Meeting

Published 12/12/2019, 05:39 AM
Updated 12/12/2019, 06:03 AM
© Reuters.  Brazil Cuts Rates and Leaves Options Open for Next Meeting

© Reuters. Brazil Cuts Rates and Leaves Options Open for Next Meeting

(Bloomberg) -- Brazil cut its benchmark interest rate by half a percentage point to a record low and said it will exercise caution in its next monetary policy decision, leaving the door open for additional easing.

The bank’s board, led by its President Roberto Campos Neto, on Wednesday lowered the Selic rate to 4.5%, as expected by all 53 economists in a Bloomberg survey. It was the fourth straight reduction of 50 basis points, and it came hours after the U.S. Federal Reserve kept its key rate on hold.

The central bank “judges that the current stage of the business cycle recommends caution'' on monetary policy, bank board members wrote in a statement issued after the decision. “The Committee emphasizes that its next steps will continue to depend on the evolution of economic activity, the balance of risks, and inflation projections and expectations.”

The central bank is ramping up monetary stimulus to jolt an economy that has only recently shown signs of gaining steam, after nearly three years of disappointing performance. They extended a record-breaking monetary easing cycle even after food costs jumped and the real hit a record low, potentially fueling inflation. Despite those shocks, analysts still see consumer prices running below target next year.

“The inflation outlook remains benign, even if prices picked up due to temporary factors, such as meat costs,” Luciano Rostagno, chief strategist at Banco Mizuho, said before the rate decision. “That wasn’t enough to change the central bank’s plans for a reduction.”

In the 12 months through November, consumer prices rose 3.27%, according to the national statistics agency. Policy makers target inflation at 4.25% this year and 4% in 2020.

Since the prior rate-setting meeting in late October, the real has weakened more than 3%, the second-worst drop in emerging markets. Campos Neto has said the Brazilian currency’s depreciation hasn’t translated into worse inflation expectations, and that the country’s risk premium has improved.

(Adds central bank comment in third paragraph)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.