Brazil's central bank maintains reference rate at 6.5%

The Central Bank of Brazil (BCB) on Wednesday kept its basic interest rate at 6.5%, its historic minimum, at its first meeting after the election of the right-wing president Jair Bolsonaro, announced the monetary authority.

The decision, unanimously approved by the nine members of the BCB's Monetary Policy Committee (Copom), coincides with the expectations of most analysts.

Bolsonaro was elected with the promise that his appointed Economy Minister, Paulo Guedes, would substantially reduce state spending in order to reduce the congestion of the public debt.

Without referring to these prospects, the Copom statement merely states that its next steps in managing Selic's base rate "will continue to depend on the evolution of economic activity, the balance of risks and projections of inflation expectations ".

Among the risks, it gives "more weight" to the tied people "with a frustration of expectations regarding the continuity of the reforms and the necessary adjustments of the Brazilian economy", which could be intensified with "a deterioration of the external scenario of the emerging economies "

As the main anti-inflation tool, the benchmark rate is at its historical low since March, after repeated losses.

The price increase is close to the target set by the government, which is 4.5% for the current year.

The pressure on prices has decreased in recent weeks, after the Brazilian real strengthened against the dollar while the victory of Jair Bolsonaro was clearly described.

The dollar was traded Wednesday at 3.72 reais, after reaching 4.20 reais in September, at a time when opponents opposed to the policy of adjustment were well placed in the polls.

The National Confederation of Industries (CNI) said Copom's decision was "fair" and stressed that "the resumption of the rate reduction path will depend on the elected government", which will take office on 1 January.

Força Sindical on the contrary denounced "an excess of conservatism" in the decision of Copom and called for the resumption of the cycle of cuts aimed at encouraging an economy that has gone through two years of recession, between 2015 and 2016, and two other low growth.

The market is expecting 2018 to end with inflation of 4.43% and GDP growth of 1.36%.