Brazil cuts interest rate to new record low of 7.5 percent
August 31, 2012, 12:30 am TWN
BRASILIA -- Brazil's central bank on Wednesday slashed its interest rate for the ninth time since August last year, to a record low of 7.5 percent, in a bid to revive sluggish economic growth.
The bank's monetary policy committee Copom announced the half-point reduction after the market closed.
Any “adjustment of monetary conditions” should be carried out “with maximum parsimony,” Copom said in a statement.
The rate-cutting policy, which began exactly a year ago, aims to stimulate the economy at a time when it is suffering from China's economic slowdown and the dragging U.S. recovery.
The government is banking on GDP growth of 3 percent this year while market analysts are forecasting a rise of only 1.7 percent.
Goldman Sachs said earlier this week that it expected the cut could be the last in the cycle that began a year ago, given that inflation is rising.
“In addition, the central bank is increasingly confident about an economic uptick in the second half of 2012, due to the recent monetary easing policy and the increase in tax incentives,” it added.
The world's sixth largest economy showed clear signs of a slowdown in the first quarter of this year, expanding only 0.2 percent compared with the previous quarter.
Official GDP figures for the second quarter of 2012 are due to be released Friday.
The Brazilian economy grew a paltry 2.7 percent last year, down from a sizzling 7.5 percent in 2010.