September 6, 2017 / 5:00 AM / 10 months ago

Brazil set to slash rates by another 100 bps to four-year low

BRASILIA, Sept 6 (Reuters) - Brazil’s central bank is set to cut benchmark interest rates on Wednesday to their lowest since 2013, keeping a fast pace of monetary easing as inflation remains contained during a slow economic recovery.

The bank’s monetary policy committee, known as Copom, is widely expected to slash its Selic rate by 100 basis points to 8.25 percent at its next meeting, according to a Reuters poll.

The decision is expected to be announced at 6 p.m. (2100 GMT) on Wednesday.

With inflation holding near 18-year lows and far below the bottom of the central bank’s target range, policymakers have slashed borrowing costs since last October in hopes of pulling the economy off its worst recession on record.

Brazil has resumed growth in the first half of the year, but high unemployment and low usage of production capacity by most companies after the recession continue to keep prices under control. That has led economists to expect interest rates to drop to as low as 7.25 percent by year-end, according to a central bank poll.

Some economists expect the central bank to signal after Wednesday’s decision that it is ready to slow down the pace of interest rate cuts at its following meeting in October.

“The committee should change its communication soon,” Itau Unibanco economists wrote in a research note.

Central Bank President Ilan Goldfajn told Reuters last month that the labor market was recovering faster than anticipated, but that should not keep the bank from cutting rates. (Reporting by Silvio Cascione; Editing by Lisa Shumaker)

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