Brazil’s Central Bank cut the policy rate to 2%

The Central Bank of Brazil cut the benchmark interest rate (Selic rate) by 0.25pp to 2% on August 5, amid mixed signals on the economic recovery after many businesses resumed working. This is the ninth cut in the last thirteen months. During the previous two meetings, the monetary policy committee reduced the rate by 0.75pp each time, as Brazil experienced the COVID-19 shock.   

The decision to continue with the monetary stimulus was influenced by the subdued inflation rate. The official CPI grew by 2.13% y/y in June, well below the inflation target of 4% y/y for 2020. In the end of the year, the markets expect that the inflation will reach 1.63% y/y and that the Selic rate will remain at 2%.

Further data and analysis on Brazil’s economy could be found on the CEIC Brazil Economy in a Snapshot – Q2 2020 report.