BRASILIA, Brazil, Sept 23 (Reuters) - Brazil's central bank expressed confidence it was winning its anti-inflation battle despite high global oil prices, and economists said the "optimistic" tone of the remarks issued on Thursday raised the chances of a sizable interest rate cut.
In minutes of its Sept. 13-14 policy-making meeting, the central bank said "benign" inflation allowed it to reduce its benchmark interest rate last week for the first time since March 2004 after monetary policy steered inflation towards its goals.
The bank cut the benchmark Selic rate by a quarter of a percentage point to 19.5 percent, and analysts saw increased chances the bank would cut the sky-high rate, one of the highest in the world, by half a percentage point at the end of its Oct. 18-19 meeting.
"I was thinking of 25 bps again next month, now I'm tilting more towards 50 bps, their overall view remains very positive," said economist Nuno Camara at Dresdner Kleinwort Wasserstein in New York.
Prior to the minutes, many economists expected the bank to keep a conservative stance on rate easing by reiterating risks of higher oil prices and faster economic growth on inflation.
In the minutes, the bank said higher global oil prices were not likely to jeopardize Brazil's path to lower inflation and signaled more cuts were likely.
The bank said it did not expect the economy to overheat as it expanded and saw strong access to external financing.
"The flexibilization of monetary policy will not compromise important victories in recent months in the fight against inflation," said the minutes, released on Thursday, from its policy-making meeting.
The central bank raised the Selic nine times between September and May to curb inflation, then held it steady.
The bank said in the minutes tough monetary policy has "boosted the probability inflation will converge to its targets" for the IPCA Broad Consumer Price Index.
It said its internal projections show inflation will rise less than its targets of 5.1 percent for this year and 4.5 percent for next year.
"Its outlook doesn't get any more optimistic than this," said Vladimir Caramaschi, chief economist at the Fator brokerage in Sao Paulo, adding that the bank had opened the door for a 50 basis point cut in October.
Central Bank President Henrique Meirelles has ruthlessly cut inflation from 12.5 percent when he was named central bank president in 2002 to 7.6 percent in 2004, often at the cost of economic growth.
source;bloomberg.com |
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