Members of Banco Central do Brasil's monetary policy committee unanimously agreed to cut the Selic benchmark interest rate by 50 basis points to 5.50%, citing the economy's gradual recovery and subdued inflation.
In the international context, general economic slowdown and slower inflation prompted greater monetary stimulus in major economies, which has been relatively favorable for emerging markets. However, risks due to a greater downtrend in global growth remain, the committee said.
Copom, as the committee is known, said its inflation projections are at around 3.3% for 2019 and 3.6% for 2020, assuming that the interest rate will drop to 5.00% by the end of this year, and remain at that level throughout 2020.
A high level of economic slack and fears that the government will not be able to implement necessary reforms and adjustments represent considerable risks for the projections in this baseline scenario, Copom noted.
In its decision, the committee said the current rate "is consistent with convergence of inflation to target over the relevant horizon for the conduct of monetary policy, which includes 2020."
The committee emphasized that economic conditions continue to prescribe stimulative monetary policy, and therefore "interest rates below the structural level."
