RIO DE JANEIRO: Brazil's central bank is expected to pare back its key interest rate Wednesday by 0.25 percentage points but analysts say political uncertainties mean the 11th consecutive cut would be the last for a while.
The cut would bring the Selic rate to a new low 6.75 percent, following a half percentage point reduction in December which took the key rate to a record low seven percent, about half of what it had been a year before.
Rates have been coming down steadily, along with a strong fall in inflation and the economy's slow emergence from a stifling two-year recession. However, the central bank may decide to put the brakes on this policy in view of the uncertainty surrounding October presidential elections, analysts say.
That means the expected 6.75 percent rate would be here to stay through the "volatile" year, said Fabricio Stagliano, from Walpires Corretora.
"It is hard to make predictions for the interest rate because the more time that passes, the more room there is for uncertainty," he said.
High among those doubts is whether center-right President Michel Temer will manage to push through cuts to the pension system, the keystone of austerity reforms aimed at bringing discipline to the floundering economy.
For now, the government does not have enough votes in Congress and although the measure is popular among investors, many voters fiercely oppose any reductions in the generous system.
There is also a question over the chances of any business-friendly centrist candidate in the elections.
The frontrunners are currently leftwing ex-president Luiz Inacio Lula da Silva and right-wing firebrand Jair Bolsonaro. Adding to that uncertainty, Lula doesn't even know if he can run, since he is fighting a corruption conviction and prison sentence.
The Selic got as high as 14.25 percent in October 2016, when the ministry was fighting inflation in the midst of a recession.
By the end of 2017, inflation had fallen to 2.95 percent, a far cry from the 10.67 percent peak in 2015.
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