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Brazil’s New Key Interest Rate Shows Central Bank’s Arrogance, Says Industry Federation

In a note on the decision by the Monetary Policy Committee (COPOM) of Brazil’s Central Bank to lower the annualized benchmark interest rate (Selic) by 0.75% to 16.5%, the president of the Federation of Industries of the State of São Paulo (FIESP), Paulo Skaf, complained that "once again the COPOM has high-mindedly reasserted its absolute independence." The 16.5% rate will remain in effect for the next 45 days.

In the note, Skaf claims the decision shows that the Central Bank "does not care about the moderate pace of inflation; is unconcerned about Brazil’s ridiculous current growth rate; does not share the ideas of the majority of economists; and dismisses the critical arguments presented by the productive sector."

The FIESP president goes on to question whether this attitude "represents autonomy or arrogance."

The Federation of Industries of Rio de Janeiro (FIRJAN) also issued a note, stating that "it is essential for the drop in interest rates to be accompanied by measures that permit the expansion of productive investment in the country, an indispensable prerequisite if there is to be long-term development."

The Copom has reduced Brazil’s basic interest rate, the Selic, by 0.75 percentage points, lowering it from 17.25% to 16.50% per year. Copom has been steadily and gradually reducing the Selic since September of last year. Since then the rate has fallen 3.25 percentage points.

A note from Copom says the decision was by a 6 to 3 vote, with the three other votes in favor of a bigger reduction of one percentage point.

ABr

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