Stênio Ribeiro      Reporter Agência Brasil

Brasília – Brazil’s basic interest rate, the Selic, which, at 8.5% for the last 45 days, was already at a historical low, was lowered further last night (July 11), when the Central Bank’s Monetary Policy Committee (“Copom”) voted unanimously to reduce it another 0.5 percentage points to 8% per year.  This was the eighth consecutive meeting in a series that began in August 2011, where Copom lowered the Selic (Copom meets every 45 days). During that time, Copom has lowered the Selic 4.5 percentage points, that is, from 12.5% to 8%. Or, to put it another way, reduced the Brazilian benchmark interest rate by 36%. Needless to say, banking industry interest rate reductions lag slightly behind the Selic. In fact, according to a Consumer Foundation poll in São Paulo (“Pesquisa da Fundação Procon de São Paulo”), interest on a bank loan will cost you more than the Selic in a month (Procon found that the average interest on an overdrawn checking account (“cheque especial”) was 8.36% per month).

In an explanatory note on its decision to lower the Selic yesterday, Copom said it considered inflation risks limited domestically and saw deflation abroad due to the fragile global economy.

The vast majority of financial analysts expected the 0.5 percentage point reduction, although there were some, as reported in the Central Bank’s weekly market survey, Focus, who betted on an even bolder reduction of 0.75 percentage points because of weak inflationary pressure and sluggish economic activity.

The next Copom meeting is scheduled for the end of August.

Allen Bennett – translator/editor The News in English

Link - Copom diminui taxa básica de juros para 8% ao ano