Brazil Cuts Selic to 7.5 Percent, Second Lowest in History

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Brazil’s Central Bank lowered the country’s benchmark interest rate (SELIC) for the ninth consecutive time on Wednesday. The Monetary Policy Committee (COPOM) decided unanimously to lower the SELIC by 0.75 percentage points, to 7.5 percent per year, putting the rate at one of the lowest rates in history.

“The set of indicators of economic activity released since the last COPOM meeting is consistent with a gradual recovery of the Brazilian economy,” read the statement released by the Central Bank after the meeting.

With this latest reduction of the country’s benchmark interest rate, the SELIC now equals the level seen in May 2013, and is 0.25 percentage points shy of the 7.25 percent seen from October 2012 to April 2013, the lowest level of the rate in Brazilian history.

According to COPOM members the country’s inflation scenario has evolved as expected and inflation developments remain favorable. According to the latest weekly Focus Report (survey of 100 economic consultancies conducted by the Central Bank) inflation expectations retreated to around 3.1 percent for 2017 and 4.0 percent for 2018.

Wednesday’s interest rate cut, however, shows a more cautious Central Bank. In the last four meetings, the COPOM committee reduced the rate by one percentage point. According to the statement, the intensity of the cut may decrease even further in the upcoming meetings.

“For the next meeting, if the basic scenario evolves as expected, and because of the stage of the easing cycle, the Committee sees as adequate a more moderate reduction of monetary easing,” said the statement.