Central Bank Cites Impact of Crisis and Says that Interest Rate Cuts Will Slow Down

06/01/2017 - 13h15

The political crisis in President Temer's government, blown wide open by the contents of the plea bargain signed by the JBS executives, has already started to interfere in the Brazilian economy. Anticipating the effects of turbulence, the Central Bank's Monetary Policy Committee (COPOM) decided to maintain the rate of decrease in the country's base interest rate (SELIC).

On Wednesday (the 31st), COPOM announced a rate cut of 1 percentage point in the yearly SELIC rate, to 10,25%. Before the release of the audio recording by Joesley Batista, one of the owners of JBS, with President Temer, the financial markets had been projecting a reduction of 1,25 percentage points.

Additionally, the Central Bank signaled that the pace of easing in rates will be reduced at the next committee meeting in July.

The course change, according to its communique, is related to uncertainty regarding continued progress in the reform process and adjustments in the economy. "Due to the basic scenario and the current balance of risks, COPOM understands that a moderate reduction in the pace of monetary easing in relation to the pace adopted today should be adequate" it stated.

Translated by LLOYD HARDER

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