Brazil’s central bank keeps rate unchanged

Bloomberg

Brazil held its benchmark interest rate unchanged and signalled that Congress needed to approve cost-cutting measures before borrowing costs can fall.
The bank board, led by its President Ilan Goldfajn, kept the Selic rate at 6.50 percent for a seventh straight meeting in a decision expected by all 42 economists in a Bloomberg survey. It was likely the last under Goldfajn, as the Senate this month is expected to approve President Jair Bolsonaro’s nominated successor.
In a statement accompanying the decision, the board members considered that “inflationary risks have moderated” since their last meeting, but they stressed that the “frustration of expectations regarding the continuation of reforms” could trigger price pressures.
“The central bank sees a better global outlook, but that’s still not enough,” said Newton Rosa, chief economist at Sul America Investimentos Dtvm. “This throws some cold water on bets of a key rate cut.”
The newly elected speakers of both houses in Congress have expressed support for a proposal to cut pension outlays that are the heart of Brazil’s budget woes. Yet it is far from clear if and when the government can muster the necessary majority in Congress to approve the constitutional amendment.