Brazil’s central bank kept its key interest rate unchanged at a nine-year high for the fourth straight meeting on Wednesday.
The monetary policy committee voted to hold Selic rate at 14.25 percent. Two members sought a 50 basis point hike, while other six members voted to retain the rate at current level. The bank was expected to lift its rate by 50 basis points.
Considering the macroeconomic scenario, the outlook for inflation and the current balance of risks, and considering the increase of domestic and primarily, external uncertainties, the Committee decided to maintain the Selic rate at 14.25 percent, the bank said in a statement.
The central bank was already short on credibility with regards to inflation targeting and today’s decision is a further blow, Neil Shearing at Capital Economics, said. Policymakers have bowed to government pressure not to increase rates in the face of rising inflation, the economist noted.
The International Monetary Fund early this week said it was largely concerned about Brazil, where political uncertainty surrounding the Petrobras investigation has led to a severe recession. The country’s GDP projection for this year was sharply cut by 2.5 percentage points to -3.5 percent.
The material has been provided by InstaForex Company – www.instaforex.com