Brazil Cuts Key Interest to Record Low, But It’s Still World’s Highest

For the ninth time in a row in a process that started last September, Brazil’s Central Bank has lowered its Selic (Sistema Especial de Liquidação e de Custódia – Special System for Settlement and Custody), the overnight interbank rate.

The half percentage point reduction brings the benchmark rate to 14.75%, the lowest Brazil has seen in 10, 20 or 31 years depending on which source to believe among the differing reports in the Brazilian press.

Such low rate from a Brazilian perspective, however, would still be one of the highest if not the highest in the world. Among the 49 central banks tracked by the financial site Bloomberg the Brazilian one wins as having the costliest money.

Inspired by the American bank system Brazil created the Copom (Comitê de Polí­tica Monetária – Monetary Policy Committee), an organ of the Central Bank, in 1996.

The Committee became responsible for establishing the basic rate of interest (Selic) and keep inflation in check according to the wishes of the CMN (Conselho Monetário Nacional – National Monetary Council).

Copom has a nine-member board led Henrique Meirelles, who is the Central Bank’s president. All of the members voted in favor of lowering the interest and without bias, which means that there won’t be any change in the Selic until the Central Bank’s men get together again on August 29 and 30.

In the note released to the press, the Copom explained: "In continuing the flexibilization process of the monetary police started in the September 2005 meeting, the Copom decided by unanimity to reduce the Selic’s rate to 14.75% a year, without bias, and to follow the macroeconomic scenario until the next meeting in order to then define which steps to take in its monetary policy strategy."

Representatives of industry, commerce and workers all criticized the Central Bank’s cut as too timid and too tardy.

The Fiesp, São Paulo’s Industry Federation, issued a statement saying that Brazil’s low inflation would justify a deeper cut in interest than the one made by the Copom. "There is plenty for a bigger reduction of the Selic and only the Central Bank cannot see it," said the industry representatives noting that with an expected 3.8% inflation, the benchmark rate represents a 10.6% real interest rate.

For Força Sindical, an association of workers union, the reduction is not enough to stimulate the economy in order to create more jobs. "The job offer will increase only when there is a bigger growth of the economy. In order to grow you need plentiful and cheap credit," they assert in a note.

Tags:

  • Show Comments (1)

  • ch:c

    Records !!!!!
    You have many records but usually not the good ones such as education, wealth inequality, economic growth.

    but you hold others…such as : corruption, wealth inequality, injustice, impunity,lack of infrastructure, vote buying, violence, crimes, kidnapings, lack of water sewage treatment (10%), lack of garbage collection (10%) and many more !

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Brazil’s Meat Giant Perdigí£o Gets 30% Boost in Exports

The Brazilian meat sector industry Perdigão recorded 29.6% greater exports in the second quarter ...

IMF’s Advice to Brazil: ‘Share the Riches’

The Managing Director of the International Monetary Fund (IMF), Rodrigo Rato, said today, in ...

Brazil’s Debt to the Ford Foundation: E Unum Pluribus

The United States of America has long been recognized as a beacon of race ...

Brazilian jail

We Need Jails. Education Alone Won’t Put Brazil Together Again.

Some problems are not solved in isolation. One example of this is the violence, ...

Brazil’s Bar Calls for Criminal Probe and Possible Impeachment of Lula

The council of Brazil’s federal Bar Association (Conselho Federal da Ordem dos Advogados do ...

Brazilian passport

Why Can’t Brazilians Get a US Visa? Denying Them Has Become a Cash Cow!

The US Consulates in Brazil administer the processing of Visa applications to come to ...

Chinese in Brazil to See How Alcohol Fuel is Made

A Chinese mission will arrive in Brazil on Monday, April 11, to see the ...

Brazil Starts Flu Vaccination of Its 16 Million Elderly

Under the banner "Live better – Get Vaccinated Against Flu," Brazil’s Ministry of Health ...

Troubling Waters

The Brazilian electricity crisis has shown that the lack of water in the Northeast ...

Brazil’s Eletrobrí¡s Makes US$ 507 Million, a 261% Rise

Brazil's state-owned Eletrobrás Group, which operates in the field of power generation and supply, ...