UPDATE 4-Brazil keeps rates steady, but opens door for cuts if inflation eases

miércoles 31 de agosto de 2016 19:05 GYT
 

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By Alonso Soto and Silvio Cascione

BRASILIA Aug 31 (Reuters) - Brazil's central bank kept interest rates at a decade high for the ninth straight time on Wednesday, but signaled a rate cut could be in the cards later this year if stubbornly high inflation subsides.

In a unanimous vote, the bank's monetary policy committee - known as Copom - kept its benchmark Selic rate at 14.25 percent, its highest since July 2006.

Although Brazil's borrowing costs are among the world's highest for a major economy, inflation has remained stuck around 9 percent as a surge in food prices offset a sharp drop in consumer demand.

The central bank removed from its statement a previous reference to the lack of room to cut interest rates, but laid out the blueprint to lower borrowing costs.

"The committee judges that a loosening of monetary conditions will depend on factors that allow greater confidence on meeting the inflation targets at the relevant horizons," the bank said.

The bank highlighted a reduction in uncertainties regarding the approval of austerity measures and easing food inflation as key factors to flexibilize monetary policy. The bank also said it will monitor the effects high interest rates and a subdued economy will have on the pace of disinflation.

The country's stubborn inflation has puzzled economists and raised worries among policymakers that it may threaten an economy they believe to be near a turning point as a political crisis eases and business confidence returns to the former star of emerging markets.   Continuación...