Brazil cenbank cuts rates, with more likely to come, but flags 'adverse' backdrop
By Marcela Ayres
BRASILIA (Reuters) -Brazil's central bank cut its benchmark interest rate by 50 basis points on Wednesday for the third time in a row and once again signaled more of the same for its upcoming meetings, but also flagged an «adverse» external backdrop for emerging economies.
The bank's rate-setting committee, known as Copom, unanimously reduced its Selic benchmark interest rate to 12.25%, a move expected by all 40 economists polled by Reuters.
«If the scenario evolves as expected, the committee members unanimously anticipate further reductions of the same magnitude in the next meetings, and judge that this pace is appropriate to keep the necessary contractionary monetary policy for the disinflationary process,» said the central bank in its decision's statement.
However, despite its expectation of keeping its pace of rate cuts, the bank mentioned an «adverse» global outlook that «requires caution on the conduct of monetary policy.»
The prospect of higher long-term U.S. interest rates has led to a tightening of global liquidity and strengthening of the dollar, adding to inflation pressures in emerging markets like Brazil.
«Despite anticipating the next steps of 50 basis points, there appears to be less visibility and confidence regarding the overall extent of the cycle,» said Daniel Cunha, chief strategist at brokerage BGC Liquidez.
In its statement, the central bank also highlighted the persistence of elevated core inflation in several countries, alongside emerging geopolitical tensions following the outbreak of the Israel-Palestine conflict.
Policymakers again reiterated that the overall extent of the easing cycle over time will depend on a range of factors, including the inflation dynamics and the output
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