Rate cuts still on the cards

30/04/2012

Brazil's central bank is still considering cutting its benchmark lending rate if such action is needed to boost the economy.

The latest minutes from the bank revealed that given the delayed effects of existing rate cuts, further reductions should be “conducted with parsimony”.

Its interest rate futures yields have already dropped to a record low, but the bank's board has voted unanimously to cut the Selic rate by 75 basis points to nine per cent, according to reports from Bloomberg. The news agency noted that this is due to the easing of inflationary pressures thanks to the “fragile” global economy.

Jose Goncalves, chief economist at Banco Fator SA, told the news agency: “If the situation remains as is, the bank will cut again by 25 basis points and hold for quite a while. There are various indicators of slowness; disappointing surprises with the pace of growth.”

Despite the Brazilian government taking steps to stimulate its economic growth, the country is still enjoying a strong financial performance along with the other BRIC countries, especially in comparison to traditionally strong established countries, whose economies are still struggling to secure growth in the wake of the recession.