The Brazilian Central Bank’s Monetary Policy Committee acted as markets expected on Wednesday, cutting the country’s benchmark interest rate by half a percentage point to 12.75 percent.
The committee anticipated further reductions of the same magnitude in the next meetings. There are two meetings left this year (one in November and another in mid-December), meaning the rate would rise to 11.75 percent — in line with markets’ expectations for the end of the year.
“The current context, characterized by a stage in which the disinflationary process tends to be slower and with partial re-anchoring of inflation expectations, requires serenity and moderation in the conduct of monetary policy,” the committee wrote in a statement.
It also reinforced “the need to persist on a contractionary monetary policy until the disinflationary process consolidates and inflation expectations anchor around its targets.”
The bank’s decision and its outlook suggests that a resilient economy has the monetary authority both optimistic for growth but remains in inflation-fighting mode.
Inflation has not spiraled out of control, even as the Brazilian economy...
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