Interest Falls to 4.5%, and Central Bank Leaves Future Open
The Copom (Central Bank Monetary Policy Committee) reduced the basic interest rate from 5% to 4.5% per year, confirming the unanimous expectation of the financial market. The BC has not committed to further cuts, which means that the reduction cycle may be nearing its end. It was the fourth cut announced by the BC in the administration of President Jair Bolsonaro. Since December 2017, interest rates have been renewing the historical lows. The Selic is again at its lowest level since it became a monetary policy instrument in 1999. At the previous meeting, the institution had stated that the consolidation of a benign inflation scenario would allow an additional cut of 0.5 percentage points in December. In Wednesday's statement, the institution did not commit to a further cut at its next meeting in February 2020. It merely repeated that the economic environment prescribes stimulating monetary policy, but that the current stage of the economic cycle calls for caution. "The committee emphasizes that its next steps will continue depending on developments in economic activity, the balance of risks and inflation projections and expectations," the Central Bank said.