Brazil's Central Bank Cuts Key Rate, Signals It Will Stand Pat Next Meeting

02/07/18 03:58 PM EST
By Paulo Trevisani and Jeffrey T. Lewis 

BRASÍLIA -- Brazil's central bank trimmed its benchmark lending rate to a record low Wednesday amid volatility in world stock markets and growing concern about rising global inflation.

The bank's monetary-policy committee cut its benchmark Selic rate to 6.75%, from 7%, and indicated it would hold the Selic at that level at its next meeting.

"Provided the committee's baseline scenario evolves as expected, at this time the [committee] views the interruption of the monetary easing process as more appropriate," the bank said in its note announcing the cut.

The inflation rate in Brazil remains below the central bank's 3% to 6% target range, at 2.9% in January, while unemployment remains high and the economy is just starting to recover from a two-year recession. That combination should permit the central bank to leave the Selic where it stands for months to come, analysts said.

Brazil's economic output is projected to have expanded 1% in 2017, and forecasts for 2018 are around 3%, a mark last hit in 2013. Joblessness is at 11.8%, but it has been declining for nine months, from a peak of 13.7% in March 2017.

"Activity is coming back slowly, but it's better that way," said Mauro Calil, an economist at Ourinvest bank. "It wouldn't be good to recover too fast," which could fuel price increases, he said.

Write to Paulo Trevisani at paulo.trevisani@wsj.com and Jeffrey T. Lewis at jeffrey.lewis@wsj.com

 

(END) Dow Jones Newswires

February 07, 2018 15:58 ET (20:58 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.