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Brazil’s central bank cut its benchmark Selic interest rates by 75 basis points to 12.25 per cent on Wednesday, maintaining a sharp easing cycle as a recession in Latin America’s largest economy shows signs of bottoming out.

The central bank began loosening monetary policy in October from a high of 14.25 per cent with a 25 basis point. In the past three months, the central bank has stepped up the pace with Wednesday marking the second time it has cut rates by 75 basis points, writes Joe Leahy in São Paulo.

“The conjunction of economic activity indicators that have come out since the last meeting of Copom [the monetary policy committee] have shown some mixed signals but are compatible with a stabilisation of the economy in the short term,” the central bank said.

“The evidence suggests a gradual recovery in economic activity throughout 2017.”

The move by the central bank — which said inflation was returning to the centre of its target range of 4.5 per cent, plus or minus 2 percentage points — will reassure businesses in Brazil.

They have suffered from the high level of interest rates at a time when economic growth has been contracting at an annualised pace of more than 3 per cent.

But the central bank said the outlook for inflation would also depend on the successful implementation of fiscal reforms.

Copyright The Financial Times Limited 2017. All rights reserved.
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