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Brazil central bank leaves door open for another rate cut in March


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Brazil central bank leaves door open for another rate cut in March

Brazilian central bank policymakers agree that it would be suitable to end the bank's rate-cutting cycle if the country's economic outlook continues to evolve in line with their expectations, but they believe further monetary easing may be warranted in March if inflation continues to underwhelm, according to the minutes of the bank's most recent Feb. 7 policy meeting.

At that meeting, Banco Central do Brasil's monetary policy committee unanimously voted to lower the benchmark Selic rate by 25 basis points to a record low 6.75%.

However, policymakers were divided over how strongly the bank should indicate a potential end to its rate-cutting cycle, the minutes showed.

"Some members expressed a preference for a high level of flexibility, favoring more symmetric communication about the next step, while others proposed to signal more strongly the possible interruption of the monetary easing cycle and to maintain freedom of action, but to a lesser extent," the bank said.

It noted that the most recent economic activity indicators point toward a "consistent recovery of the Brazilian economy," while the global economic outlook has also been generally favorable "despite recent volatility of financial conditions in advanced economies."

Inflation expectations for Brazil in 2018 are at around 3.9%, while expectations for 2019 and 2020 remain around 4.25% and 4.0%, respectively, according to the central bank's Focus survey.