BRASILIA: Brazil's central bank on Wednesday again cut its benchmark interest rate by 75 basis points to 9.75 percent -- the sixth rate cut in the past eight months in an effort to boost the sluggish economy.
The bank's monetary policy committee justified the new cut -- which mirrored last month's cut of 75 basis points -- by citing the "limited risk" to further inflation.
"This cut could mark the end of the cycle of rate reductions that began in August, when the rate stood at 12.5 percent. The rate could remain unchanged for some time," said Carlos Kawall, chief economist at private Banco J. Safra.
The government, markets and analysts had expected the central bank would opt for a rate cut, given that inflation is on the wane inLatin America's largest economy and the need to help rein in the cost of credit for Brazilians.
Last August, the central bank reversed course following a series of rate hikes to clamp down on inflation and it has since brought down its base interest rate from 12.5 percent then to the current nine percent.
But the rate is still among the highest in the world, sparking a massive influx of capital which is in turn causing an appreciation of the real and a loss of competitiveness for domestic industries.
Inflation inBrazilreached 6.5 percent in 2011, the upper limit of the official target, but has tapered off in the first months of this year, meaning it could drop to or near the official target of 4.5 percent by end-2012.
With inflation now coming under control, the government of President Dilma Rousseff wants to focus on boosting economic growth, which slowed to 2.7 percent last year, from 7.5 percent in 2010.
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