Fears of a slower economic recovery in Brazil could pave the way for heftier rate cuts, the central bank said clearly signaling more aggressive monetary easing ahead as the country’s worst recession in memory worsens.
Two weeks ago, the bank cut its benchmark Selic rate by 25 basis points to 13.75%, maintaining the slow pace of rate cuts to secure inflation eases to the 4.5% of the official target next year.
In the minutes of that meeting, the bank said some members argued for a more aggressive rate cut given the slowdown in inflation and advances in approving fiscal measures in Congress.
All members, however, agreed that the recovery has disappointed as the recession threatens to stretch into a third year.
“The palpable risk that a timely recovery of activity does not materialize should allow for the intensification of the pace of monetary easing,” the bank added.
By acknowledging that the economy could take longer to recover the central bank clearly signaled a heftier rate cut is warranted at its Jan 11 meeting.