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Brazil Set to Hold Rates at All-Time Low

Brazil Set to Hold Rates at All-Time LowBrazil Set to Hold Rates at All-Time Low

Brazil’s central bank is likely to hold interest rates at an all-time low on Wednesday even after inflation jumped back within its target range, due to an underwhelming economic recovery keeping a lid on price pressures in the medium term. The bank’s monetary policy committee, known as Copom, is widely expected to keep its benchmark Selic interest rate at 6.50% at the conclusion of a two-day meeting, according to a Reuters poll of economists. The decision is expected to be announced at 6:00 p.m. (2100 GMT). Product shortages driven by a nationwide trucker strike in the final weeks of May, along with higher power rates, lifted the 12-month inflation rate to 4.53% in mid-July from 2.70% in mid-May.  The central bank is targeting year-end inflation of 4.50% for 2018 and 4.25% for 2019, with a tolerance margin of 1.5 percentage points in either direction. Yet economists say the short-term inflation bump is likely to fade soon due to double-digit unemployment rates and widespread idle capacity among companies.

 

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