BRASILIA, Oct 31 (Reuters) - Brazil is expected to hold interest rates at an all-time low on Wednesday after far-right lawmaker Jair Bolsonaro was elected president on Sunday, easing concerns of a currency selloff.
The bank’s monetary policy committee, known as Copom, is widely expected to maintain the benchmark Selic rate at 6.50 percent at the end of a two-day meeting, according to a Reuters poll of economists.
The announcement is due at 6 p.m. local time. (2100 GMT)
Investors’ trust in the ability of Bolsonaro and his economic guru, University of Chicago-trained banker Paulo Guedes, to rein in public debt have taken the Brazilian real from all-time lows to a five-month high.
A stronger currency could make imports cheaper, reinforcing the prospect of slow inflation going forward. Headline inflation has surpassed the 4.5 percent midpoint of this year’s target range, but a less volatile measure known as core inflation remains subdued due to a weak economy.
Economists polled by Reuters either maintained or lowered their rate forecasts in the wake of Bolsonaro’s victory, with some predicting a first hike only in 2020.
That is a sharp change in outlook from just two months ago, when a global dollar spike had pushed the Brazilian currency near record lows. At its last policy meeting, the central bank warned that it could hike rates if the outlook worsened.
Future decisions may depend on whether Bolsonaro, a former Army captain, can garner support in Congress for fiscal reforms despite alienating many moderates with praise of Brazil’s 1964-1985 dictatorship and comments denigrating minorities. (Reporting by Bruno Federowski; Editing by David Gregorio)