BRASÍLIA: Brazil’s central bank kept interest rates on hold at 14.25 per cent for the sixth straight meeting on Wednesday as the country braces for a deep government shake-up. In what may be the current board’s last decision before a new central bank president is appointed, the monetary policy committee voted to keep the benchmark Selic rate at its near-decade high.
Latin America’s biggest economy has been struggling to emerge from one of its deepest recessions on record while containing soaring inflation. After running at almost 11 per cent in January, Brazil’s inflation has finally begun to slow and is currently around 9.3 per cent — still more than double the country’s official 4.5 per cent target.
Brazil’s currency, the real, has strengthened about 12 per cent against the dollar this year, helping the central bank in its battle against inflation by making imports cheaper. While the country’s economic outlook has shown little improvement, investors have bought Brazilian assets on bets that President Dilma Rousseff will soon be replaced by a more market-friendly leader. After Brazil’s lower house of congress voted in favour of Ms Rousseff’s impeachment earlier this month, bets have grown that Michel Temer, vice-president, could take over as soon as May.
He is expected to scrap the country’s current economic team, appoint a new finance minister and central bank president, as well as introduce spending cuts to fix the growing budget deficit. Meanwhile, economists expect rising unemployment and other effects of the country’s recession to slow inflation further over the months ahead, paving the way for interest rate cuts later this year.
