Brasília – For the first time in four years, the Brazilian Central Bank has cut the benchmark interest rate. By unanimous decision, the bank’s Monetary Policy Committee (Copom) trimmed the rate by 0.25% percentage point to 14% per annum this Wednesday (19). The move was expected by financial analysts, who had forecasted a rate cut this month.
In a statement, the Copom said the food price hike reversal helped keep inflation at bay better than expected. Nonetheless, it justified the move by pointing out risks such as uncertainty regarding the approval of fiscal adjustment measures, and the possibility that the long period during which inflation remained above the top end of the target range might lead to greater indexing of the economy, meaning that past inflation will be incorporated into current prices.
The last interest rate cut had been from 7.5% to 7.25%, in October 2012. The rate was the lowest ever and was kept that way through April 2013. Since then, the benchmark rate was changed up gradually until it reached 14.25% per annum in July 2015.
*Translated by Gabriel Pomerancblum
