Brazil Cuts Key Rate to 13%


The Central Bank of Brazil lowered its benchmark Selic rate by 75bps to 13 percent on January 11th 2017, beating market expectations of a 50bps cut. It is the third straight rate decline, bringing borrowing cost to the lowest since March of 2015 amid slowing inflation and a severe contraction.

Policymakers said inflation has been lower expected. Yet, inflation for December came in at 6.29 percent, the lowest since April of 2014 and within the 4.5 percent to 6.5 percent target for 2016. The central bank also lowered expectations for 2017 to around 4 percent (from 4.4 percent) and to around 3.4 percent in 2018 (from 3.6 percent).

Policymakers added that evidence suggests economic recovery could take even longer and be more gradual than previously expected. Yet, the GDP shrank 0.8 percent in the third quarter of 2016, seventh straight contraction and the IBC-BR index of economic activity fell 0.48 percent month-over-month in October. The Markit manufacturing PMI fell to 45.2 in December from 46.2 in November, suggesting a steeper contraction in manufacturing.

Brazil Cuts Key Rate to 13%


Joana Taborda | joana.taborda@tradingeconomics.com
1/11/2017 9:02:50 PM