Brazil Central Bank cuts interest rate to 6.5% a year

Despite the lowering, the financial institute is slowing down its

Published in 21/03/2018 - 19:20 By Wellton Máximo reports from Agência Brasil - Brasília

The Brazilian Central Bank’s Monetary Policy Committee on Wednesday (Mar. 21) reduced its benchmark interest Selic rate by 0.24 percentage points—from 6.75% to 6.5% a year. The decision had been expected by analysts.

The rate remains at the lowest level since the beginning of this time series, in 1986. From October 2012 to April 2013, the Selic stood at 7.25% per annum and was gradually raised until it reached 14.25% per annum in July, 2015. In October, 2016, the committee once again cut the economy’s benchmark interest rate until it went down to 6.75% a year in February, the lowest value until then.

Despite the lowering, the financial institute is slowing down its interest reductions. From April to September, the committee had decreased the Selic by one percentage point. The pace of declines slipped to 0.75 percentage point in October to 0.5 in December, and 0.25 at the meetings in February and today.

Selic is the Central Bank’s main tool for curbing the official inflation, as measured by the National Broad Consumer Price Index—IPCA in the original acronym. According to the Brazilian Institute of Geography and Statistics (IBGE), the accumulated rate shows a 2.84% increase for the 12-month period ending in February, which is below the inflation target, set at 3%.

Until 2016, the target for the inflation as set by the National Monetary Council had stood at 4.5%, with a margin of 2 percentage points. For 2017 and 2018, the council reduced the tolerance margin to 1.5 percentage points. The inflation, therefore, must not surpass 6% this year or go any lower than 3%.

Inflation

In the Inflation Report, released late in December, the Central Bank estimates that the inflation will close out 2018 at 4.2%. According to the Focus Readout, a survey that hears financial institutions on a weekly basis and made public by the Central Bank, the official inflation should close out the year at 3.63%.


Translated by Fabrício Ferreira


Fonte: Brazil Central Bank cuts interest rate to 6.5% a year

Edition: Wellton Máximo / Mariana Branco

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