Stênio Ribeiro     Reporter Agência Brasil

Brasília – Exactly a year ago the Central Bank’s Monetary Policy Committee (“Copom”) began a series of eight consecutive meetings in which they reduced Brazil’s benchmark interest rate, the Selic. As a result, the rate fell from 12.5% to 8% - a reduction of 4.5 percentage points, or 36% (at six of those meetings, Copom reduced the Selic by 0.5 percentage points, and in two meetings (March and April of this year) the reduction was 0.75 percentage points).

And today, as the Copom begins its sixth meeting of the 2012, the markets expect more. The latest Central Bank weekly survey of market sentiment, the Focus report, which interviews financial institutions and analysts, found that the market expects a ninth consecutive reduction of the Selic, which will bring it to a historical low of 7.5%.

However, market opinion is mixed about future reductions of the Selic. There are signs of renewed economic activity that brings forth possible problems with inflation. In fact, Focus has reported rising inflation expectations for seven consecutive weeks. The latest market forecast is for inflation of 5.19%, which is above the government’s core target of 4.5% (the government inflation metric is the Broad Consumer Price Index – IPCA, with a margin of error of plus or minus two percentage points.

Allen Bennett – translator/editor The News in English

Link - Copom realiza mais uma reunião sob expectativa de nova redução da Selic