The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
Brazil’s central bank opened the door to more interest rate cuts as it signalled that the outbreak of the new coronavirus creates a bigger risk of an economic slowdown than of a spike in inflation.
Policy makers said that they’re closely monitoring the effects of the epidemic on financial markets and on the wider economy. Its impact on Brazil’s economy is a greater threat than a possible deterioration in asset prices, they added.
“The central bank left the door wide open for new rate cuts, a door that had been temporarily closed in their last meeting,†said Andre Perfeito, chief economist at Necton Investimentos. “I see two additional cuts of 50 basis points this year which may leave us with negative real interest rates.
Swap rates fell on Wednesday as investors priced in at least a quarter-point cut to the benchmark Selic rate, currently at an all-time low of 4.25%. The Brazilian real was little changed after closing at a record low, which could potentially fuel future inflation.
Brazilian policy makers suggested they will wait until their next monetary policy meet on March 18 to decide whether to change benchmark Selic rate.