Brazil central bank expected to keep rate at 14.25%

GMT 23:00 2016 Tuesday ,07 June

Arab Today, arab today Brazil central bank expected to keep rate at 14.25%

Brazilian Central Bank president-designate Ilan Goldfajns
Brasília - AFP

Brazil's central bank was expected to maintain its benchmark interest rate at 14.25 percent Wednesday for a seventh consecutive time, amid the worst recession in decades and political instability. 

The bank, which makes rate decisions eight times a year, has held its key Selic rate steady since the last of seven consecutive hikes in July 2015.

Despite the flailing economy -- with a 3.8 percent shrink in GDP last year forecast to persist through 2016 -- the latest consensus of 100 economists and analysts in a weekly survey by the Central Bank's Focus magazine is for no change.

The steady-as-she-goes policy has been dictated mostly by fears of stoking inflation, which hit 9.28 percent year-on-year in April, more than double the average 4.5 percent target for 2016 and 2017.

This month, the bank is also expected to want to wait for confirmation of its new chief, Ilan Goldfajn, who was appointed by interim president Michel Temer after suspension of president Dilma Rousseff for an impeachment trial.

"The Selic rate will remain stable at 14.25 percent while waiting for the new administration and also while waiting for more convergence of inflation projections with the target from 2017," said a note to investors from Guide Investimentos in Sao Paulo.

Latin America's biggest economy has been in recession since the second quarter of 2015. The three main credit rating agencies have lowered their Brazil rating to junk status.

The economic downturn has dovetailed with a political crisis in which economic reforms have languished amid paralysis in Congress and the impeachment push against Rousseff.

Rousseff, who is accused of illegally manipulating government accounts, was suspended last month. A vote in the Senate on whether to remove her permanently from office could come as early as August.

She has been replaced by her former vice president, Michel Temer, but his interim government is already in trouble from a growing corruption scandal.

Brazil's national jobless rate hit a record 11.2 percent between February and April, the government statistics office said last week.


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