Brazil’s Haddad sees room for rate cut of more than 25bps By Reuters

BRASILIA (Reuters) – Brazil’s Finance Minister Fernando Haddad said on Thursday he sees room for the central bank to cut interest rates by more than 25 basis points at its next meeting in August.

“Everyone is expecting a rate cut,” Haddad said in an interview with RedeTV journalist Kennedy Alencar, noting the hot topic now is the size of the cut.

Brazil’s central bank has conducted one of the world’s most aggressive tightening cycles since early 2021 in a bid to tame high inflation, with the key Selic rate at a six-year high of 13.75% since August 2022.

But with annual inflation at its lowest level in nearly three years, within the central bank’s target, a rate cut is largely expected, with economists now pondering its size.

A Genial/Quaest poll with 94 fund managers, economists and analysts working for 67 different firms in Brazil showed on Wednesday that 92% of them forecast the central bank to kick off a monetary easing cycle next month.

However, they still diverge on the size of the cut, with 55% of those polled betting on a 25-basis-point move while 32% expect a 50-basis-point cut.