BRAZIL’S central bank slashed its key interest rate by a half-point yesterday for the second straight time, advancing the easing that President Luiz Inacio Lula da Silva hopes will kickstart Latin America’s biggest economy.

In line with market expectations, the bank’s monetary policy committee said its members had unanimously voted to lower the benchmark Selic rate to 12.75%.

The cut came the same day the US Federal Reserve paused its own aggressive series of rate increases, but predicted a long fight against inflation was still ahead.

Brazil looks headed in the opposite direction, at least for now.

The central bank indicated further monetary easing was on the way.

However, it gave no signs larger cuts were coming.

“The committee members unanimously foresee a reduction of the same magnitude in the coming meetings, and consider this pace appropriate” to keep inflation on target, it said in a statement.

The committee’s next meetings conclude on November 1 and December 13.

Brazil’s annual inflation rate has picked up slightly in recent months, from 3.16% in June to 4.61% last month.

But that remains within the central bank’s target range of 3.25% plus or minus 1.5 percentage points.

The bank’s decision to kick off its easing cycle last month marked its first interest rate reduction in three years.

Haunted by a history of hyperinflation, Brazil had gone on one of the most aggressive monetary tightening cycles in the world when the Covid-19 pandemic and then Russia’s invasion of Ukraine sent global prices on an upward spiral in early 2021.

But with inflation now having eased from double digits to within the bank’s target range, Lula had pushed hard for rate cuts, saying a high Selic was “irrational” and stunting Brazil’s growth.

Veteran leftist Lula has gotten several bits of good news on the economy in recent weeks, with GDP growth coming in at a better-than-expected 0.9% for the second quarter and unemployment at a new nine-year low of 7.9%. – AFP, September 21, 2023.