Brazil holds interest rate at a record low

Bloomberg

Brazil held its benchmark interest rate at a record low and signaled it can cut borrowing costs to help a frail economy once a key austerity measure advances further in Congress.
The bank’s board, led by its President Roberto Campos Neto, kept the Selic unchanged at 6.50 percent in a decision expected by all but one of the 39 economists in a Bloomberg survey. Officials have held borrowing costs steady for over a year.
In the statement accompanying the decision, the committee wrote that while the external scenario was less adverse, risks associated with a global economic slowdown remained. Domestically, progress on reforms is “essential” for a fall in structural interest rates and for a sustainable economic recovery, it added.
Brazilian policy makers have stuck to their cautious stance even as central banks from India to Russia rush to shore up their economies by cutting borrowing costs and the US Federal Reserve signaled it was ready to do the same for the first time since 2008. Growth expectations have plunged and inflation is seen remaining at or below target in the foreseeable future, prompting a surge in investor bets for key rate cuts. Still, a fresh round of polit-
ical bickering has cast a shadow over the government’s pension reform proposal, which the central bank sees as crucial to keeping a lid on consumer prices.
“The conclusion is that risk related to the reform’s approval is important,” said Gustavo Rangel, chief Latin America economist at