Brazil forecast to cut interest rate to new low of 6.25%
Brazil's Central Bank was forecast to drop its interest rate Wednesday to a historic 6.25 percent low, as President Michel Temer declared victory in his bid to end a brutal recession. A new 25 basis points cut in the key Selic rate from 6.5 percent would follow up on the Central Bank's sustained campaign to stimulate a still tepid recovery from Brazil's worst recession on record.
Back in October 2016, when the bank was fending off high inflation, the rate had climbed all the way to 14.25 percent. However, analysts predicted that a cut on Wednesday would be the last in the cycle of 13 consecutive lower rates as the bank looks to potential new inflationary threats.
Temer used the second anniversary of his government -- which took power after the still controversial impeachment of Dilma Rousseff -- to declare that Brazil was in good economic health again. "We are responsible and proud for having taking the country out of its worst recession in history," he said Tuesday.
Temer, who has single-digit approval ratings, admitted that his market-orientated reforms and austerity measures had "cost us our popularity," but insisted that he'd done the right thing. "The results are there, the numbers are good. We did in two years what the others didn't do for 20," he said. Uncertain times lie ahead, however.
Analysts say the Central Bank is eyeing inflationary pressure from possible rate hikes in the United States, the increase in oil prices and devaluation of the national currency, the real. On Tuesday, the dollar traded at 3.66 real, a two year high. The real has lost 10 percent of its value against the dollar since January.