Brazil’s cbank cuts key rate

BRASÍLIA, April 16, (AFP): Brazil’s Central Bank cut the key interest rate by one percentage point in an accelerating strategy of trying to inject life into the floundering economy.

This was the fifth straight cut, taking the key Selic rate to 11.25 percent.

“The evidence suggests a gradual resumption of (economic) activity,” the bank said in a statement.

In February, the bank made a 0.75 percent cut but falling inflation has created even greater leeway to stimulate the economy, market analysts say.

Brazil is into its third year of recession and although it is forecast to return to weak growth later this year, unemployment is at more than 13 percent, meaning few Brazilians are feeling the effects of the reported recovery.

Rate cuts began last October, starting from a high of 14.25 percent, and Wednesday’s cut was the biggest so far.

“Inflation is on a benign trajectory and this opens the door to a cut,” Luis Pereira, strategy analyst at Guide Investimentos, told AFP.

Analysts say that the Selic is likely to fall as low as 8.5 percent by the end of this year, then likely stay there next year until presidential elections are held.

What the bank hopes is that “people and businesses will have less incentive to save and this will increase the tendency of capital to funnel into investment and consumption and to increase activity,” said economist Wellington Ramos at Austin Rating.

In April, Brazil registered its lowest quarterly inflation since 1994 at 0.96 percent. Annual inflation is currently 4.57 percent.