BCN-03 Brazil’s central bank cuts interest rate to record 4.5%

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ZCZC

BCN-03

BRAZIL-ECONOMY-RATE

Brazil’s central bank cuts interest rate to record 4.5%

BRASILIA, Dec 12, 2019 (BSS/AFP) – Brazil’s central bank cut its key
interest rate to a record low on Wednesday, as the country’s economic
recovery gains traction.

The bank lowered its main rate from 5.0 percent to 4.5 percent in a
unanimous decision by its monetary policy committee.

It was the fourth straight decrease since July and came as the US Federal
Reserve voted to keep its rates steady.

“Economic activity data for the second quarter indicate the Brazilian
economy’s recovery gained traction,” the bank said in a statement.

The bank “assumes that this recovery will continue at a gradual pace.”

It also noted several gauges of underlying inflation were at “comfortable
levels.”

Its decision came after official data showed an acceleration in economic
growth in the third quarter, spurred by an improvement in agriculture,
industry and services.

After stalling in the first three months of the year, the economy has had
two consecutive quarters of growth, steering clear of a recession that had
seemed likely only months ago.

The bank made 12 consecutive cuts from October 2016 to March 2018,
slashing the rate from 14.25 percent to 6.5, where it remained until July
when it was cut again to 6.0.

Industry welcomed the latest reduction.

“After decades of very high rates, we start 2020 with low rates and the
forecast that they will remain so for a long time,” said Paulo Skaf,
president of the Federation of Sao Paulo State Industries.

But the decision is likely to put further downward pressure on Brazil’s
currency, which fell to a historic low against the dollar last month.

US President Donald Trump last week announced plans to reimpose tariffs on
steel and aluminum from Brazil and Argentina, accusing them of manipulating
their currencies and hurting American farmers.

Brazil’s President Jair Bolsonaro rejected the accusation.

The latest interest rate cut was made possible by a pension reform
approved by Congress in October that will allow Brazil to save 800 billion
reais ($194 billion) over the next decade.

But a wave of protests sweeping across Latin America appears to have
slowed the pace of other reforms in Brazil, where the government seeks to
avoid igniting unrest.

The central bank said persevering with the reform agenda was “essential”
for the economy’s sustainable recovery.

BSS/AFP/HR/0905