Brazil’s central bank said a faster pace of interest rate cuts is unlikely after it began an easing cycle with a larger-than-expected cut of 50 basis points.
“The Committee considers that there is little likelihood that the pace of adjustment will intensify,” Brazil’s central bankers wrote in the minutes of their Aug. 1–2 meeting.
“A quicker pace of rate decreases would need considerable improvements in inflation dynamics beyond conventional measures, including lower estimates of consumer price rises, a rapid widening of the output gap, and more benign pricing pressures in the services sector,” they wrote.
Policymakers, led by Roberto Campos Neto, signaled their plans to keep pace with monetary easing in Latin America’s largest economy as inflationary dynamics gradually improve. Consumer price growth is now below target, while basic measures, excluding energy and food, are also slowing down.
At the same time, gross domestic product (GDP) is forecast to grow by only 1.3% next year.
