Brazil Central Bank Lowers Interest Rate: Daily

By Sarah de Sainte Croix, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – The Brazilian Central Bank’s Monetary Policy Committee (Copom), have started the new month by reducing Brazil’s basic interest rate, (known as the Selic), for the first time in over a year. They announced the 0.5 percent drop – from 12.5 percent to 12 percent – on Wednesday, at the close of their most recent meeting.

Leader in the House of Representatives, Cândido Vaccarezza, explains the Central Bank (BC) decision to reduce the interest rate, photo by Antonio Cruz/ABr.

The decrease marks a turning point for Brazil’s growing economy, which has seen the Selic steadily rise since April 2010. Prior to this, interest rates had been in decline since January 2009, going from 13.75 percent, to an all time low, in July 2009, of 8.75 percent.

Leader in the House of Representatives, Cândido Vaccarezza, explains: “I hope to continue the flow to lower interest rates in the country because it is a consensus that interest rates are too high and nobody wants that,” he said.

Economists have praised the committee’s action, however, there are concerns that the 0.5 percent reduction was too conservative.

Paulo Pereira da Silva, president of the labor union, Força Sindical, called the move “timid and insufficient”.

The acting president of the São Paulo Industrial Federation (Fiesp), João Guilherme Ometto, concurred, saying that Copom may have committed “a grave error” by acting so cautiously.

He said, “In order for the country to maintain a strong rhythm of growth, what is needed is a strong reduction in interest rates, while maintaining prices under control. Keeping interest rates high is just repressing consumption and subjecting Brazil to the effects of the international crisis.”

Read more (in Portuguese).

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