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Brazil's Benchmark Interest Rate Falls to 7% and Reaches Lowest Level to Date

12/07/2017 - 10h05

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FROM SÃO PAULO

On Wednesday, December 6, in its last meeting of the year, the Copom (Brazil's Central Bank's Monetary Policy Committee) decided to cut the country's benchmark interest rate (Selic) by 0.5%, reaching 7% a year.

This made the interest rate in Brazil drop to the lowest level to date.

It was the tenth consecutive decline of the benchmark interest rate. The unanimous decision met the expectations of the 49 economists interviewed by Bloomberg news agency, who expected a 0.5% decline.

The new figure also was aligned with the number estimated by the Central Bank's Boletim Focus.

The 0.5% cut represented a new reduction in the Central Bank's decline pace - after the meeting in October, the country's benchmark inertest rate declined by 0.75%.

Since April, when the interest rate fell from 12.25% to 11.25% per year, the Copom had been making one percent cuts.

In the official statement disclosed after the meeting, the Copom indicated that a new reduction in the benchmark interest rate could be "adequate" if the economic scenario improves as the Central Bank expects.

The Central Bank says that inflation figures are still favorable; however, there are risks, including the effects of the favorable shock on food prices and possible frustrated expectations regarding the approval of the reforms.

The average interest rate charged by banks, however, is still far from its lowest level.

The most expressive example is the interest rate charged for personal loans. In October, according the Central Bank's most recent data, the interest rate was 132% a year with a delinquency of 8%.

It is expressive, however, that the base interest rate in November 2012 was 66.3% and delinquency was 8.8%.

Translated by THOMAS MUELLO

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