Brazil cuts benchmark rate to 14%, opens door to further easing

Brazil has cut its benchmark interest rate by 25 basis points to 14%, with a view to hauling the country's economy out of recession.

The so-called Selic rate was pared by the nine-member Copom in a unanimous decision. It cited uncertainty around needed adjustments and concerns over the relative stickiness of inflation.

Copom, which is the monetary policy committee of Brazil's central bank, flagged it would proceed with a moderate and gradual easing cycle, potentially with steeper cuts.

Schroders emerging markets economist Craig Botham said the cut was much anticipated, but disappointed some in the market who were looking for a 0.5% slice.

"The rate cut comes as recent Brazilian activity data have disappointed, and inflation has begun to moderate," Botham said in a statement.

"Beyond macroeconomic data, we have also seen positive political developments towards addressing the fiscal issues facing Brazil. All of these will have helped to make the case for easing, so why not ease more aggressively?"

"If we see passage of the spending cap bill and continued support for fiscal reform, the central bank will reward policymakers with more easing, and the extent of that easing will be data dependent," Botham commented.

"An easing cycle will reduce the drag on the economy from the existing debt burden, and should support the nascent investment recovery. We expect at least another 50 basis points of cuts this year."