Brazil to speed up rate cuts

AFP, BRASÍLIA: Brazil's Central Bank is expected to cut the key interest rate by one per centage point on Wednesday in an accelerating strategy of trying to inject life into the floundering economy, analysts say.
This would be the fifth straight cut, taking the key Selic rate to 11.25 per cent.
In February, the bank made a 0.75 per cent cut but falling inflation has created even greater leeway to stimulate the economy, market analysts say.
Brazil is into its third year of recession and although it is forecast to return to weak growth later this year, unemployment is at more than 13 per cent, meaning few Brazilians are feeling the effects of the reported recovery.
Rate cuts began last October, starting from a high of 14.25 per cent, and Wednesday's cut, if confirmed, would be the biggest so far.
"A cut of 100 basis points (one per cent) is the overall market consensus. Inflation is on a benign trajectory and this opens the door to a cut," Luis Pereira, strategy analyst at Guide Investimentos, told AFP.
"However, economic activity continues to be very weak and the bank needs to pay attention to the labor market which has deteriorated more rapidly than expected."
Analysts say that the Selic is likely to fall as low as 8.5 per cent by the end of this year, then likely stay there next year until presidential elections are held.

Brazil to speed up rate cuts

AFP, BRASLIA: Brazils Central Bank is expected to cut the key interest rate by one per centage point on Wednesday in an accelerating strategy of trying to inject life into the floundering economy, analysts say. This would be the fifth straight cut, taking the key Selic rate to 11.25 per cent. In February, the bank made a 0.75 per cent cut but falling inflation has created even greater leeway to stimulate the economy, market analysts say. Brazil is into its third year of recession and although it is forecast to return to weak growth later this year, unemployment is at more than 13 per cent, meaning few Brazilians are feeling the effects of the reported recovery. Rate cuts began last October, starting from a high of 14.25 per cent, and Wednesdays cut, if confirmed, would be the biggest so far. A cut of 100 basis points (one per cent) is the overall market consensus. Inflation is on a benign trajectory and this opens the door to a cut, Luis Pereira, strategy analyst at Guide Investimentos, told AFP. However, economic activity continues to be very weak and the bank needs to pay attention to the labor market which has deteriorated more rapidly than expected. Analysts say that the Selic is likely to fall as low as 8.5 per cent by the end of this year, then likely stay there nextyear until presidential elections are held.