Brazil cuts interest rates for first time in 4 years

Posted on October 19, 2016

Brazil’s central bank has cut interest rates for the first time in four years as the country struggles to emerge from its deepest recession on record.

The monetary policy committee cut the benchmark Selic rate late on Wednesday by 25 basis points, to 14 per cent, from a near-decade high of 14.25 per cent.

Most analysts expected the central bank to kick off the country’s first monetary easing cycle since 2012 on Wednesday but they had been divided over the size of the cut, with some predicting a 50 basis point reduction.

For the past year the central bank has been forced to keep rates on hold as the country battled with a toxic combination of soaring inflation and a shrinking economy.

However, easing price pressures over recent months and greater confidence in Brazil’s new market-friendly government have helped pave the way for interest rate cuts.

The move comes as the rest of the region looks to expansionary monetary policy to boost growth following the end of the global commodity boom.

While Argentina has already started aggressively cutting borrowing costs, pressure is growing in Chile and Colombia to follow suit.

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