07/23/2009 11h32

BC cuts Selic for the 5th consecutive time

O Estado de S. Paulo

The Central Bank (BC, in Portuguese) announced the fifth consecutive reduction in the basic interest rate of the economy yesterday night. In a unanimous decision of the Monetary Policy Committee (Copom), the Selic rate fell 0.50 percentage point, to 8.75% a year. The decision renewed the historical floor of the interest rate in Brazil and caused the Country to go from 3rd to 5th place in the international ranking of the highest interest rates.

To explain the decision, the Copom mentioned, in a public announcement, that the new level collaborates for the convergence of the inflation with the goal and helps in the "non inflationary recovery of the economic activity". Since the cuts started, in January, the interest rate fell 5 points. Now, analysts foresee a steady Selic rate until, at least, 2010.

In the public announcement, the BC affirms the new level is "consistent with a situation of benign inflation". And that the reduction in the rhythm of the cuts - the rate fell 1 point in June - took into account that the reductions occurred since January "have delayed and cumulative effects on the economy".