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 10-Million Ad Blitz to Make Chicken into a National Symbol

A US$ 10 million campaign is being elaborated by advertising agency Young & Rubicam ...

Big Jump in Brazil’s Cars Export and Production

Brazil’s vehicle exports increased by 49.5% in the first nine months of the year. ...

Microfinance Program Started in Brazil Gets US$ 5.8 Million from Gates Foundation

Accion International, a leader in global microfinance, which started its pioneer work in Brazil  ...

China Shows Interest in Building Rio-São Paulo Bullet Train Railway

Brazil and China bolstered their growing ties with trade and investment agreements on Thursday ...

Foot and Mouth Disease Don’t Alter Brazil’s US$ 117 Billion Overall Exports

The outbreak of hoof and mouth disease will cause Brazilian beef exports to drop ...

In Brasília Assemblymen Get Busy Trying to Prevent a Federal Intervention

The assemblymen in the Federal District Legislative Assembly (CLDF) are hard at work to ...

Brazilian Police Kill Drug Lord. Gangs Fight to Control His Cocaine Points.

One of Brazil’s most wanted drug lords was killed in a shootout with police ...

Social Issues Are Not Priority in Brazil, Says Brazilian Group

After accompanying accusations of human rights violations for two years in 15 Brazilian states ...

US Counting on Brazil to Quench Its Orange Juice Thirst

Brazil seems poised to increase its market share of oranges in the United States. ...

If It All Goes As In Scripts Past Brazil Will Soon Lose 6th Minister to Corruption

According to Brazil’s most popular weekly news magazine, Veja, advisers to Brazilian Labor minister ...