Brazil’s central bank has cut its key interest rate by half a percentage point, predicting further cuts of the same amount until 2024 as inflation falls back towards the target, and the global economic outlook improves.
Policymakers led by Roberto Campos Neto lowered the “Celik” rate to 11.75% late on Wednesday, as all analysts expected.
In a statement accompanying the decision, policymakers wrote that headline inflation continues to slow. At the same time, many key price indicators that exclude volatile items such as food and energy are getting closer to the set target.
“If the scenario develops as expected, the members of the commission unanimously expect further reductions of the same magnitude at the next meetings,”the bank’s board members wrote, repeating the directions given in their previous decision.
Brazil’s central bankers are moving ahead with plans to ease monetary policy“calmly” and”moderately”, as annual inflation is expected to finish the year within the target range for the first time since 2020. At the same time, economic activity is slowing down, the decline in US Treasury bond yields has reduced the pressure on the riyal, thereby mitigating potential threats to the cost of living.
Brazil’s announcement came hours after the US Federal Reserve kept interest rates steady for the third meeting, giving the clearest signal yet that its aggressive rate hike campaign is over by predicting a series of cuts next year.
In their statement, the governors of the Brazilian central banks wrote that the global economy is less negative than at their previous meeting. They pointed to low long-term interest rates in the United States and initial signs of low core inflation in some countries.
At the same time,“the committee considers that the environment continues to require caution from emerging market economies,”the policymakers wrote.
