Brazil cut its benchmark interest rate for the eighth straight time and signaled it will continue to lower borrowing costs, as spillover from a global economic slowdown limits inflation risks.
Central bank board members voted unanimously yesterday to cut the benchmark Selic rate by a half-point to a record 8 percent, as forecast by all but three of 59 analysts surveyed by Bloomberg. In a statement almost identical to ones issued at their two previous meetings, policy makers said “fragility” abroad is having a “disinflationary” impact in the world’s second-biggest emerging market, providing little guidance about how much more stimulus they judge necessary to revive growth.
Brazil’s seasonally adjusted economic activity index, a proxy for gross domestic product, fell 0.02 percent in May, the central bank said today in a report posted on its website. The median estimate from 26 economists surveyed by Bloomberg was for a decline of 0.4 percent. The non-seasonally adjusted index rose 1.09 percent from a year ago, more than the 0.25 percent increase forecast by 24 analysts.
The slower-than-expected recovery should allow policy makers to maintain the pace of interest rate reductions at half-point intervals, a government official familiar with the bank’s deliberations said last week on the condition of anonymity.