Brazil Monetary Policy


COPOM cuts interest rates by another 50 basis points

At its 19 October meeting, the Central Bank's Monetary Policy Committee (COPOM, Comite de Politica Monetaria) decided to reduce the SELIC interest rate by another 50 basis points to 11.50% in a unanimous vote. This was the second consecutive meeting in which policymakers opted to cut interest rates by 50 basis points. Since the commencement of the new easing cycle on 31 August, the Central Bank has cut a cumulative 100 basis points off interest rates. The COPOM justified its decision by citing the deteriorating global economic scenario as well as a slowdown of the domestic economy. On 1 November, the Senate Economic Affairs Committee approved the addition of an ?economic growth and job creation? target to the Central Bank's current mandate. The proposal to include an explicit GDP growth target in the Central Bank's monetary policy model confirms the new strategy of the Central Bank and the Brazilian government, which aims to stimulate economic growth by lowering the SELIC interest rate. That said, in order to tame inflation, the government plans to cut USD 50 billion off expenditures in its 2012 budget, which should help to contain inflationary expectations.


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