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Brazil Central Bank: future interest rate cuts may come

Xinhua, March 3, 2017 Adjust font size:

The Brazil Central Bank's monetary policy committee (Copom) announced Thursday that more cuts may be coming to the country's benchmark Selic interest rate, as a way to control inflation.

This statement follows Copom's decision last week to reduce the Selic rate from 13 to 12.25 percent annually, the fourth successive cut since October and its lowest level since the start of 2015.

In October, when Selic stood at 14.25 percent, Copom began a monetary flexibility process, after two years of the rate standing still. This was caused by Brazil's two-year economic recession and inflationary concerns.

The statement also showed that Copom has lowered its inflation expectations for 2017 to 4.2 percent, with 1.5 percentage points of tolerance. This is below the government's objective of 4.5 percent.

A recent survey of financial institutions showed broad agreement, with expectations for inflation to reach 4.36 percent in 2017 and 4.5 percent in 2018.

However, Copom warned that any future cuts to Selic would depend on the application of the government's fiscal reforms and their ability to keep inflation down.

Copom highlighted the importance of these reforms for Brazil, alongside infrastructure investments and other efforts to improve productivity, economic flexibility and the country's business outlook.

"These efforts are crucial for the stabilization and recovery of economic activity as well as for the development of the Brazilian economy," read the statement.

Copom's next meeting, when it will next discuss interest rates, will be held on April 11-12. Enditem