Thursday, January 19, 2012

Brazil Central Bank Cuts Selic Rate 50bps to 10.50%

The Banco Central Do Brasil cut the Selic interest rate by another 50 basis points to 10.50% from 11.00% previously.  In its statement, Brazil's Central Bank Monetary Policy Committee (Copom) said [translated]: "The Monetary Policy Committee believes that the timely mitigate the effects coming from a more restrictive global environment, a moderate adjustment in the level of the base rate is consistent with the scenario of convergence of inflation to the target in 2012."

Brazil's central bank previously cut the rate by 50 basis points in November, 
October and September, after raising the Selic rate by 25 basis points to 12.50% at the June Copom meeting last year, which at the time amounted to total tightening for the year of 175 basis points.  Brazil reported an annual inflation rate of 6.5% in December, compared to 7.31% in September, 7.23% in August, 6.87% in July, 6.71% in June, and 6.55% in May, and just outside the official inflation target of 4.50% +/-2% (2.5-6.5%).  

The "BRIC" emerging market economy grew 0.0% q/q in the September quarter (0.7% in June, 0.8% in March), placing annual growth at 2.1% (3.1% in Q2, and 4.2% in Q1).  The Brazilian Real (BRL) has weakened about 7% against the US dollar over the past year, while the USDBRL exchange rate last traded around 1.77


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