World Economy

Brazil CB Keeps Rates on Hold

Brazil CB Keeps Rates on HoldBrazil CB Keeps Rates on Hold

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.

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