Brazil’s central bank kept its benchmark Selic rate at 13.75% per year on Wednesday. It was the first monetary policy decision since President Luiz Inácio Lula da Silva won re-election, and it ended a cycle of rate cuts that began in March. The hold surprised markets.
Banco Central left its future policy path open. It cited greater uncertainty and higher expected inflation. Brazilian assets fell after the announcement, though the Ibovespa opened slightly higher on the following day, at 167.9 thousand points.
Weak activity data
Services activity contracted in October. The Brazil services PMI from S&P Global fell to 44.5, down from 49.2 in September. Pollyanna De Lima, associate economics director at S&P Global Market Intelligence, said the data so far point to a contraction of GDP in the fourth quarter.
The composite PMI also fell, to 44.4 from 47.4. Industrial production declined 0.8 percent in September.
Political backdrop and stimulus hopes
Durigan said Lula’s fourth term is expected to provide the correct stimulus to bring rates down.
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