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Brazil Expecting Half-Percentage Cut in Key Interest Rate

The Brazilian Central Bank’s Monetary Policy Council (Copom) begins its first meeting of 2006 today and the question, as always when Copom is in session, is: what will happen to the country’s benchmark interest rate, known as the Selic?

At the moment the Selic is at 18% per year. It has fallen gradually and slowly in the most recent Copom meetings and the question the market wants an answer to is whether or not the downward trajectory will continue.

However, it is customary for Copom to announce its decision on the interest rate only on the second day of its meetings.

Most analysts are expecting that recent news about low inflation and also low productivity will encourage the members of the Monetary Policy Council to reduce the benchmark interest rates by at least half percent, to 17.50%, which is still considered too high.

For many years Copom has met monthly. Beginning this year the meetings will take place every six weeks.

ABr

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