Friday, April 20, 2012

Brazil Central Bank Cuts Selic Rate 75bps to 9.00%

The Banco Central Do Brasil slashed the Selic interest rate by another 75 basis points to 9.00% from 9.75% previously.  In its statement, Brazil's Central Bank Monetary Policy Committee (Copom) said [translated]: "The Copom considers that, at this moment, the risks for the inflation path remain limited. The Committee also notes that, up to now, given the fragility of the global economy, the contribution of the external sector has been disinflationary. Therefore, continuing the adjustment process of monetary conditions, the Copom unanimously decided to reduce the Selic rate to 9 percent p.a., without bias."

 Brazil's central bank previously cut the rate by 75 basis points in March, and 50 basis points in January, 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 5.2% in March, down from 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 inside the official inflation target of 4.50% +/-2% (2.5-6.5%).  

The "BRIC" emerging market economy grew 0.3% q/q in the December quarter (0.0% in September, 0.7% in June, 0.8% in March), placing annual growth at 1.4% (2.1% in Q3, 3.1% in Q2, and 4.2% in Q1).  The Brazilian Real (BRL) last traded around 1.868 against the US dollar. The April Copom minutes are due for release on the 26th of April; the bank next meets at the end of May.


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