Brazil expected to maintain 14.25pc interest rate

Brazil’s Central Bank was expected to maintain its benchmark Selic interest rate at 14.25 percent Wednesday, as the world`s seventh biggest economy struggles with rising inflation and severe recession.

A weekly survey of 100 market analysts by the central bank`s Focus magazine found expectations that the high rate will be held steady for the rest of the year, with a cut to 12.5 percent in 2017.

In January, the bank also left the rate unchanged, surprising the market.

Officials are under pressure to ease the hardship of ordinary Brazilians squeezed by rising prices with double-digit inflation. But the bank, caught between rising inflation and a deepening recession, has been in a bind over how to respond.

The rate has now been steady since July 2015, when the bank made the last of seven consecutive hikes to try to put a lid on inflation.

‘The country is not seeing growth and is in recession and that’s why we think the central bank will maintain the rate. It can’t lower it, because of the pressure from inflation. The situation is complicated,’ economy analyst Angelo Larozi told AFP.

‘We see the central bank as having trouble in acting independently. There are government pressures,’ he added.

Brazil registered 10.67 percent inflation in 2015, the highest since 2002, and far off the government target of 4.5 percent, or even the previous year’s annual rate of 6.41 percent.

Latin America’s biggest economy has officially been in recession since the second quarter of 2015. The three main credit rating agencies have lowered their Brazil rating to junk status.