Last week, the Copum, Brazil’s monetary policy committee, voted unanimously to cut interest rates in the country for the second consecutive time. The benchmark now stands at 12.25% after the 75 bps cut.
Brazil’s economy, though mired in recession, had seen broad inflation pressures that had prevented a more accommodative stance from the Central Bank. Those pressures appear to be easing, with inflation in the country inching towards its target rate of 4.5%. With the 4.5% threshold seen as key, the Copum appeareed to be signaling future rate decreases by forecasting 2017 inflation at between 4.2% and 4.4%.
With budget constraints hindering large amounts of fiscal stimulus, policy makers are optimistic that the monetary stimulus lower inflation is allowing, will be enough to put the country back on solid ground.
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