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Financial News: BRAZIL: Central Bank Slashes Rate, Signals With Smaller

BRAZIL: Central Bank Slashes Rate, Signals With Smaller Cuts Ahead

09/06/2017 - 19:59:00 (RTTNews)

(RTTNews) - The Brazilian central bank cut the benchmark interest rate to 8.25%, from 9.25%, in line with market expectations, and signaled that it intends to keep loosening monetary policy in the next few meetings, but at a slower pace.

"If the base scenario evolves according to our expectation, and also because of the current stage of the [monetary policy] flexibilization cycle, the Committee views, at this time, a moderate decrease in the magnitude of the monetary policy flexibilization as adequate," said the central bank in a statement.

Selic, the benchmark interest rate in Brazil, is almost halfway down from a 14.25% peak in the second half of 2016. The country's central bank recognized in the statement that it needs to fall further to promote growth in the country.

"The economic scenario requires a stimulating monetary policy - that is, with interest rates lower than the structural rate." However, the future trajectory of Selic is still contingent to data regarding economic activity and inflation risks, the central bank added.

The monetary policy committee said that Selic should end 2017 at 7.25% and start the next year at 7.00%. However, by the end of 2018, the rate should increase to 7.50%.

The interest rate cut announcement comes after Brazil posted in August its lowest annual inflation rate since February 1999, of 2.46%. The Brazilian central bank 2017 inflation target ranges from 2.5% to 6.5%.

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