By Jamie McGeever
BRASILIA (Reuters) – Brazil’s central bank slashed interest rates more than expected on Wednesday, cutting its benchmark rate by 75 basis points to a record-low 3.00% and previewing another cut as it races to shield the economy from the coronavirus pandemic.
The bank’s nine-person rate-setting committee, known as Copom, said its decision was unanimous, although two policymakers suggested an even larger cut. A Reuters survey of 26 economists at the end of April had forecast a second straight rate cut of 50 basis points at Wednesday’s meeting.
With many economists forecasting Brazil’s worst annual downturn in at least a half century, policymakers said conditions called for “unusually large monetary stimulus” and they were explicit about plans for more.
“For the next meeting, conditional on the fiscal scenario and on the economic data, the Committee considers a final monetary adjustment, not larger than this one,” they wrote in a statement accompanying their decision.
The gravity of the economic scenario and distinct lack of inflationary pressures prompted two committee members to suggest front-loading stimulus with an even bigger cut and then keeping the benchmark Selic rate on hold for a period of months.
Policymakers added that Brazil’s spending over the course of next year “as well as the perception of its sustainability” will be key to deciding the length of the monetary stimulus.
(Reporting by Jamie McGeever; Editing by Brad Haynes)
