Monetary easing may quicken in Brazil this year

Significance

At its first meeting of 2017, on January 10-11, the COPOM reduced the benchmark Selic interest rate to 13%. The 75-basis-point (bp) rate cut decision, the largest in nearly five years, accelerated the monetary easing cycle that started in October 2016. Economic recession has been relieving inflationary pressures and opening room for more intense cuts in interest rates.

Impacts

• Further reductions of interest rates may contribute to controlling government debt.
• Private debt renegotiations at lower interest rates may facilitate a recovery in domestic demand and output.
• Any positive effects of monetary policy on activity may help contain popular dissatisfaction with the government.