BRASILIA Feb 22 Brazil's central bank will
likely maintain its aggressive pace of interest rate cuts on
Wednesday despite some calls to further step up monetary easing
to rescue an economy mired in recession.
The bank's 9-member monetary policy committee, known as
Copom, will likely cut its benchmark Selic rate by
75 basis points to 12.25 percent, according to all but one of
the 54 economist surveyed by Reuters last week.
Unions and business groups have demanded a cut of 100 basis
points to reduce some of the world's highest borrowing costs,
which they say could undermine a still feeble recovery.
A rapid drop in inflation, which could end the year below
the 4.5 percent official target, has strengthened the case for a
bolder rate cut after the bank surprised markets by cutting more
than expected at its last meeting.
The recent appreciation of the real currency has
analysts betting on more aggressive rate cuts ahead.
"We think there is a growing case for a bolder cut of 100
basis points– if not now, then at the next policy meeting,"
economists with BNP Paribas wrote in a note to clients.
Central bank chief Ilan Goldfajn has signaled policymakers
would maintain the current pace of rate cuts, but that future
monetary easing would hinge on the approval of austerity reforms
to ease inflationary pressures.
Brazil's recession, the worst in its history, has left
millions unemployed and bankrupted hundreds of companies,
raising pressure on Goldfajn to lower rates.
Facing a grueling fiscal crisis President Michel Temer is
relying on falling interest rates to exit a recession that
threatens to stretch into a third year.
However, the sharp drop in inflation has sparked a debate
inside his administration over whether the government's 2019
inflation target, decided in June, should be set at a lower
level. That could slow the pace of monetary easing.
Brazil introduced an inflation rate target in 1999. The
current 4.5 percent goal was first adopted for 2005, originally
with a tolerance margin of plus or minus 2.5 percentage points.
In 2015, the government narrowed the range to plus or minus 1.5
(Reporting by Alonso Soto; Editing by Andrew Hay)