Brazil expected to slash interest rate another 1 per cent

BRASÍLIA: Brazil’s central bank is likely to slash its key interest rate on Wednesday by a percentage point to 8.25 per cent, the eighth consecutive cut as the country slowly exits a painful recession, analysts say.

The one percentage point fall in the base Selic rate predicted by markets would match a previous cut in July.

The decision will be announced after the latest August inflation figures, due out earlier Wednesday.

Markets expect 3.38 per cent price rises for this year, meaning the government will easily beat its target of 4.5 per cent inflation.

That’s light years from the 10.67 per cent inflation in 2015 and 6.2 per cent at the end of 2016.

The downward inflationary trend has freed the bank to relax rates and try to help spur an economy only just starting to show signs of creeping out of its worst recession on record.

The Selic has been lowered from 14.25 per cent in October last year, with the pace of cuts accelerating.

“I think the cut will be a percentage point. The tendency until the end of the year is for cuts to keep accompanying the revival of the economy until reaching a level at around seven or 7.5 per cent,” said Walpires Corretora analyst Fabricio Stagliano.

Market expectations polled by the central bank’s Focus weekly magazine point to the Selic ending the year at 7.25 per cent.

Last week the government welcomed an unexpected fall in stubbornly high unemployment from 13 to 12.8 per cent, although much of the growth was from low quality jobs. — AFP