Brazil Holds Key Rate at 14.25%

The central bank of Brazil left its benchmark interest rate unchanged at 14.25 percent for a fifth straight meeting on March 2nd, taking into account domestic and especially external risks and in spite of soaring inflation. Six of eight policymakers voted to hold SELIC rate and two decided voted for a hike.

The decision was in line with market expectations after governor Alexandre Tombini said inflation has peaked and should start falling in coming months but added the outlook does not allow for loosing monetary policy. The inflation rate rose to 10.71 percent in January, reaching a fresh 12-year high and is expected to accelerate further to 10.84 percent in February.

The country is experiencing one of its worst recessions. It lost 1.7 million jobs in 2015. Also, S&P and Moody's cut its rating to junk, saying economic challenges remain considerable and political dynamics will continue to complicate the authorities' fiscal consolidation efforts and delay structural reforms.

The latest FOCUS Market Readout released on February 26th by the Central Bank showed analysts from about 100 private financial institutions expect the economy to contract by 3.45 percent in 2016 and advance 0.5 percent in 2017. Annual inflation is expected to grow 7.57 percent and industrial production to decline by 4.5 percent.

 Brazil Holds Key Rate at 14.25%

Yekaterina Guchshina |
3/2/2016 10:46:44 PM