Brazil key rate heading for record-low level

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Tuesday, December 5, 2017

The Brazilian central bank is this week likely to reduce the country's benchmark interest rate, the Selic, to its lowest level ever.

The monetary policy committee, or Copom as it is known, is expected by most economists to announce late on Wednesday a cut of 50% to the Selic rate.

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The Copom has cut the Selic by 675 basis points since October last year to the current level of 7.50%.

Slowing the pace of monetary easing to 50bp from 75bp would be in line with the signals that the Copom has communicated to the market, the team of economists at Itaú Unibanco said in a research report.

The previous lowest Selic level was seen during 2012-2013, when the rate was at 7.25%. The government at the time was seeking to revive the economy by making the cost of credit cheaper to the general public.

Economists see the reduction of interest rates as more sustainable this time around since inflation is now under control.

In the 12 months through mid-November, the most recent figure available, inflation was 2.77% and well below the central bank's target of 4.5%.