Brazil’s central bank considered cutting interest rates last week but ultimately left them untouched because of potential inflationary pressure stemming from a weak currency, the minutes of its most recent policy meeting showed late Tuesday, Reuters reported. Last Wednesday, the bank unexpectedly kept the benchmark Selic rate at an all-time low of 6.50%, ending the deepest monetary easing cycle in a decade and defying widespread expectations of a 25-basis-point cut. Yields on Brazilian interest rate futures fell in early trading as investors maintained bets that interest rates will stay low for a long time. Brazil’s currency, the real, strengthened in line with global emerging markets. The bank acknowledged that the decision came as a surprise to part of the market, giving policymakers reason to hesitate. Inflation has remained below Brazil’s official target range as a result of double-digit unemployment rates, widespread idle capacity and a slower-than-expected economic recovery, while year-end forecasts for 2018 and 2019 remain below the target’s midpoint.
