BRASILIA Jan 11 Brazil's central bank will
likely step up its pace of interest rate cuts on Wednesday as
policymakers scramble to rescue the country's once-vibrant
economy from the worst recession on record as it threatens to
stretch into a third year.
Fifty out of 54 analysts polled by Reuters expect the
central bank to cut the benchmark Selic rate by 50
basis points to 13.25 percent after two straight cuts of 25
basis points. Three economists surveyed expect a more aggressive
cut of 75 basis points while one is betting on a 25-basis-point
A sharp slowdown in inflation, which earlier in 2016 had
reached double-digits, is expected to give ammunition to the
banks' nine-member monetary policy committee to comply with the
demands of politicians and the business sector for heftier rate
The record recession has left millions of Brazilians
unemployed and hundreds of companies bankrupt, stoking pressure
on central bank chief Ilan Goldfajn to lower interest rates,
which rank among the world's highest.
"The weak economy supports a 50-basis-point cut, but caution
argues against a more aggressive 75-basis-point cut," economists
with Brown Brothers Harriman wrote in a research note.
Economic figures due on Wednesday are likely to show
consumer prices rose 6.34 percent in 2016, at the
high end of the central bank's target range of 2.5 percent to
6.5 percent, according to the median of 25 estimates in another
Reuters poll of economists.
The central bank's own projections show 2017 inflation
dipping below the 4.5 percent midpoint of the target while the
economy remains lackluster with an expansion of 0.8 percent.
The recession and approval of legislation to limit public
spending for up to 20 years have paved the way for a more
aggressive rate-cutting cycle, which members of President Michel
Temer's administration see as crucial for the economy to
Analysts say Temer will probably rely on interest rate cuts
to breathe new life into the economy as growing political
turbulence and depleted state coffers limit his ability to
provide fiscal stimulus.
Many economists said the central bank could further
accelerate the pace of cuts later this year if Congress moves
ahead with a reform to cut pension benefits, which represent
nearly half of Brazil's expenditures before debt- servicing
The median Reuters poll forecast for the Selic rate at the
end of 2017 stood at 10 percent in the poll, with estimates
varying between 9 percent and 11.25 percent.
(Reporting by Alonso Soto, editing by G Crosse)