Cuts in Brazil’s Base Interest Rate Expected in Early 2024

Brazil’s Central Bank has announced plans for two successive 0.5 percentage point reductions in the base interest rate at the outset of next year, as revealed by authorities on Thursday.

During the presentation of the Quarterly Inflation Report, Central Bank President Roberto Campos Neto emphasized that the upcoming Monetary Policy Committee meetings are strategically aimed at executing policy adjustments with minimal associated costs.

The current rate, after a series of four consecutive cuts, stands at an annual rate of 11.75 per cent. By March 2024, the intended rate is anticipated to decrease to 10.75 per cent.

There has been criticism from Brazilian President Luiz Inacio Lula da Silva directed at the central bank for the delay in reducing the base rate, which initially commenced in August.

Neto reiterated the correlation between the monetary policy of the bank, essential for achieving inflation targets, and the fiscal policy of the government. He emphasized that decision-making is not mechanistic but involves a thorough examination of influential factors guiding policy.

The central bank, in its quarterly report, adjusted its inflation forecast for the current year from 5 per cent to 4.6 per cent. The target rate remains at 3.25 per cent, with a tolerance margin of 1.5 percentage points.

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