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Brazil Future Rate Cuts to Hinge on Prices, Congress Reform Push

  • Benchmark interest rate cut to 14 percent from 14.25 percent
  • Cut supports President Michel Temer’s economic growth agenda
Updated on

Read Brazil’s central bank statement after its rate cut on Wednesday and there will be little doubt that an easing cycle has finally begun in Latin America’s largest economy. Any clue though on how deep and how intense this rate cycle will be lies closer to the country’s fractured Congress.

Policy makers led by Ilan Goldfajn voted to reduce the so-called Selic rate by a quarter point to 14 percent for the first time in four years, saying in an accompanying statement that moderate and gradual monetary easing is compatible with its mission to slow inflation to target next year. For Brazilian markets, the message was clear: further rate cuts are in store but, contrary to expectations, a more aggressive pace of easing may not materialize soon.