The Central Bank of Brazil started the rate cut process more aggressively than expected and cut 50 basis points.
The Central Bank of Brazil (BCB) lowered the interest rate by 50 basis points more than expected, signaling that more cuts of the same size were on the way. It reinforced the dove rhetoric during Central Bank Governor Luiz Inácio Lula da Silva’s policy of lower borrowing costs.
Policymakers led by Roberto Campos Neto lowered the Selic rate to 13.25 percent late Wednesday, as only 11 of 41 analysts polled by Bloomberg expected.
In an accompanying statement, policymakers wrote that the consumer price outlook improved and long-term inflation expectations fell.
“If the scenario develops as expected, the committee members unanimously expect more reductions of the same size at the next meetings. This pace is considered appropriate for the continuation of the contractionary monetary policy necessary for the fight against inflation,” the statement said.
Brazil’s more-than-expected cut comes just days after Chile lowered interest rates more than economists expected. Mexico and Peru appear to be starting to loosen policies by the end of the year. Meanwhile, developed countries that are late in the fight against inflation are not out of danger yet. Last week, both the Fed and the European Central Bank left the door open for further borrowing cost increases.