Brazil Central Bank lowers interest to 14% p.a.

Brazil's Central Bank has lowered the country's benchmark interest rate for the first time in four years. By unanimous decision, the Monetary Policy Committee (COPOM) cut the SELIC rate by 0.25 percentage points on Wednesday (Oct 19), to 14% per annum.

In a statement, the committee said a trend shift from the food price hike has contributed more favourably than expected toward holding down inflation. However, it pointed out, risks to price control still persist, including uncertainties as to the approval of austerity measures, and a possibility that the prolonged history of inflation above the upper target range add further to the indexation of the economy (the incorporation of past inflation into current prices).

The COPOM had last cut interest from 7.5% to 7.25% p.a. in October 2012. This historical low was maintained until April 2013, but after successive increases it reached 14.25% p.a. in July last year.

The SELIC interest is used for the trading of government securities under the Special System of Settlement and Custody and provides a benchmark for other interest rates in the economy. It is used as the main Central Bank instrument to control official inflation as gauged by the Broad National Consumer Price Index (IPCA).

The inflation target for 2016 is 4.5%, plus or minus 2 percentage points. The cumulative rate for the 12 months ending in September was 8.48%, according to the Brazilian Institute of Geography and Statistics (IBGE).

Translated by Mayra Borges