Brazil Central Bank Indicates It Is Ready to Cut Interest Rate Again

By Paulo Trevisani and Jeffrey T. LewisFeaturesDow Jones Newswires

Brazil's central bank indicated on Tuesday that it is ready to cut its benchmark Selic interest rate again, and added that its next rate decision will be "more susceptible" to economic data than the previous ones.

"The current stage recommends caution," the bank said in the minutes from last week's monetary policy meeting, when the bank cut the Selic by half a point to 7%, as consumer price increases remained moderate. Brazil's 12-month inflation rate is currently below the bank's 4.5% target.

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The Selic is now at its lowest level on record. The next rate-setting meeting is scheduled for Feb. 7.

The bank said the pace of rate cutting could be lessened, which would mean that a reduction by a quarter of a percentage point is in store.

The bank reaffirmed that economic reform is needed to keep rates low for the long run. Brazil is struggling with large budget shortfalls that economists say could lead to a debt crisis. This would devalue the currency and bring inflation back, forcing the central bank to raise rates.

A key reform is for Brazil's insolvent pension system. Congress is debating a controversial bill meant to keep Brazilians in the workforce for longer before retiring.

"The approval and implementation of reforms, mainly the ones of a fiscal nature...is fundamental for the sustainability of the low-inflation environment," the bank said in the minutes.

Write to Paulo Trevisani at Paulo.Trevisani@wsj.com

(END) Dow Jones Newswires

December 12, 2017 05:50 ET (10:50 GMT)