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Financial News: Brazil Central Bank Cuts Rate By 100 Bps

Brazil Central Bank Cuts Rate By 100 Bps

06/01/2017 - 01:07:00 (RTTNews)

(RTTNews) - Brazil's central bank decided to reduce its interest rate again by 100 basis points despite political crisis but hinted that the pace of easing would moderate at its next meeting.

The monetary policy committee, known as Copom, unanimously decided to slash its Selic rate by one percentage point to 10.25 percent from 11.25 percent. The rate was lowered by 100 basis points at its April meeting.

The bank had started easing in October 2016 after inflation showed signs of easing.

The committee assessed that convergence of inflation to the 4.5 percent target over the relevant horizon for the conduct of monetary policy, which includes 2017 and, to a greater extent, 2018, is compatible with the monetary easing process, the bank said in a statement.

"The Copom judges that a moderate reduction of the pace of monetary easing relative to the pace adopted today is likely to be appropriate at its next meeting," the bank said.

Policymakers said the extension of the monetary policy easing will depend mainly on estimates of the structural interest rate of the economy. The uncertainty regarding the evolution of reforms in the economy hampers a more timely reduction of estimates of the structural interest rate.

If the political crisis ultimately triggers major market dislocation, it's clear that Copom will move in much smaller steps or even shelve further easing altogether, Neil Shearing, an economist at Capital Economics said.

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