Brazilian central bank cuts interest rate first time in four years to spur economic recovery

The central bank of Brazil has cut its benchmark interest rate for the first time in four years at the monetary policy meeting held Wednesday, in an attempt to spur the country’s economic recovery. The Latin America’s biggest economy is suffering the worst recession in over a century.

Brazilian central bank’s nine-member monetary policy committee, Copom cut its benchmark Selic rate by a modest 25 basis points to 14 percent, throwing further signs of a gradual and moderate easing cycle in the medium term.

"The magnitude of monetary easing and a possible speeding up of its pace will depend on a favorable evolution of factors that allow greater confidence on meeting the inflation targets at the relevant horizon for the conduct of monetary policy," Reuters reported, citing the central bank comments.

Of the 58 analysts polled by Bloomberg, 56 expected the bank to slash its interest rate, while two estimated no policy change. In its statement, the bank said it forecasts inflation at 4.3 percent in 2017 and 3.9 percent in 2018; current rate of annual inflation stands at 8.48 percent.

The move by the central bank will lend a ray of hope to many businesses and politicians who were keen to witness a rate cut to pull the economy out of the long-going recession. Lower borrowing costs could further lift confidence that has climbed steadily since President Michael Temer took office in May with a pro-business agenda.

Meanwhile, economists in a global Reuters poll on Tuesday projected Brazil's economy would only resume growth on a year-on-year basis in the first quarter of 2017.