Why the Brazilian interest rate was cut to a record low

The board of directors of the Central Bank recently decided to cut the basic interest rate for the Brazilian economy, known as Selic (The Sistema Especial de Liquidação e Custodia (SELIC). The rate was reduced from 7% to 6.50% per year, reaching the lowest recorded rate since it was first set in 1986.

According to Reuters, the Central Bank has indicated that it will continue cutting interest rates at its May meeting.
“Unless the Brazilian real comes under pressure for domestic or external reasons, the Central Bank will be in no hurry to begin the tightening cycle,” economists at Societe Generale wrote in a report.

The Brazilian government has attributed this calculated condition to numerous factors, including fiscal adjustments, public spending ceiling and a general more positive economic stance.

A lower interest rate is good news for the consumer because it means better access to jobs, stronger economic growth and greater access to credit.

Source : Reuters, www.brazilgovnews.gov.br

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