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Brazil’s benchmark interest down to 4.5% a year

The Central Bank is set to keep this rate for a while

Published in 12/12/2019 - 10:43

By Wellton Máximo Denise Griesinger / Nira Foster

For the fourth consecutive time, the Brazilian Central Bank lowered the economy’s benchmark interest rate. Its committee unanimously decided to reduce the Selic rate to 4.5 percent a year, a 0.5 percentage point cut. The move had been expected by analysts.

The decision, made Wednesday (Dec. 11), brings Selic to its lowest level since this time series was initiated by the Central Bank, in 1986.

In a statement, the bank’s Monetary Policy Committee, or Copom, said it will act cautiously and keep the rate at 4.5 percent a year for a long period, never failing to assess the economy’s conditions. The financial institution stressed the need to continue the structural reforms in the Brazilian economy so the rate may stay low for long.

Inflation

The benchmark interest rate is used in the negotiation of bonds in the country’s Special Clearance and Escrow (selic) system, and provides a gauge for other interest rates in the economy. It is also the Central Bank’s main tool to curb the official inflation (IPCA).

In November, inflation stood at 0.51 percent, the highest figure for the month since 2015, driven by the hike in the dollar and in meat prices. In 12-month period, the IPCA accumulated 3.27 percent, but is still below the 4.25 percent target set for 2019. The 2020 target was set at four percent.

Translation: Fabrício Ferreira Edition: Brasília

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