Brazil slashes interest rates to spur growth

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Brazil’s central bank slashed interest rates by 100 basis points in a decision that analysts said would help spur a recovery from the worst recession on record to hit Latin America’s biggest economy.

The central bank said it had cut the benchmark Selic rate from 12.25 per cent to 11.25 per cent, stepping up an easing cycle that began with a 25 basis point cut in October and has gradually gained steam.

The decision comes as inflation has fallen rapidly towards the centre of the central bank’s target band of 4.5 per cent, plus or minus 1.5 percentage points.

“The behaviour of inflation continues to be favourable,” the central bank said in a statement.

Brazil’s economy contracted 3.6 per cent last year after declining 3.8 per cent in 2015, leading to rising unemployment.

The government of president Michel Temer is undertaking a reform programme to try to renew investor confidence and spark a recovery. Industry has also called for an easing of the country’s traditionally high interest rates.

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