Brazil's key interest rate is set to fall to a record low of 2.25% on Wednesday as officials extend an emergency drive to reinvigorate economic activity crippled by the coronavirus pandemic, a Reuters poll showed.
BUENOS AIRES - Brazil’s key interest rate is set to fall to a record low of 2.25% on Wednesday as officials extend an emergency drive to reinvigorate economic activity crippled by the coronavirus pandemic, a Reuters poll showed.
Political risk could feed into economic weakness in coming months as well. Lawmakers are decrying President Jair Bolsonaro’s defiance of public health experts on the virus outbreak and his campaign to end state quarantine measures. In May, Brazil’s central bank slashed the Selic rate by 75 basis points, its biggest rate cut since October 2017, as it reckoned the economic damage from quarantine steps and business closures would be greater than previously thought.
Fifteen out of 20 economists who answered a separate question said the risks to rates were tilted to the downside in the short-term. The remaining five said the outlook for monetary policy was “neutral”. Despite a recent recovery in financial asset valuations, real activity figures still reflect dire conditions as Brazil endures its worst economic downturn on record, helping to keep consumer prices under control by suppressing private spending.
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