Brazil’s central bank has taken the unexpected decision to cut interest rates, bringing its seven-month tightening cycle to an end as the country prepares for slower growth and a sharp deterioration in global markets.

Policymakers on Wednesday cut Brazil’s benchmark Selic rate by 50 basis points to 12 per cent after raising it by 175 basis points over five consecutive meetings this year. Economists polled by Reuters had all expected the rate to be held at 12.5 per cent this time.
“This is a central bank that has really lost a lot of its independence,” said Tony Volpon, head of emerging markets research for the Americas at Nomura. “This is potentially a huge mistake. They are basically betting that the world economy is falling off a cliff but the numbers we are getting out of the US are not actually that bad.”

Source: Financial Times

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