Brazil maintains Selic rate as Tombini bows out

    Brazil's central bank left its benchmark Selic rate at 14.25 percent, as expected, repeating its statement from April that the high level of inflation and the distance to its inflation target did "not allow monetary policy easing."
    The Central Bank of Brazil's policy committee, known as Copom, voted unanimously to maintain the rate, without a bias.
    The central bank halted its tightening campaign in July 2015 after raising the Selic rate by 700 basis points since April 2013 in an effort to push down inflation.
    It was the last Copom meeting chaired by Alexandre Tombini, who is being replaced by Ilan Goldfajn, who was confirmed as president of the central bank by Brazil's Senate on Tuesday.  
    Goldfajn is among a series of changes to Brazil's economic management in an effort to pull the country out of recession and regain investors' confidence.
    Economists expect the arrival of Goldfajn at the central bank to herald the start of a series of rate cuts that will bring the Selic down to 13 percent by end-year.
    Brazil's inflation rate rose slightly to 9.32 percent in May from 9.28 percent in April but financial institutions expect inflation to ease this year and further next year when it is seen reaching 5.50 percent.
    The central bank targets inflation of 4.5 percent, plus/minus 2 percentage points, but in 2017 the tolerance range will be narrowed to 1.5 percentage points.
    Brazil's economy remains mired in recession, with Gross Domestic Product shrinking by an annual 5.4 percent in the first quarter of this year, the eight consecutive quarter of declining output.
    Brazil's real has been depreciating since mid-2011, with the decline picking up speed in the 12 months from September 2014 to September 2015. Last year it lost 33 percent against the U.S. dollar.
    Since January this year the real has been on a firming trend and was trading at 3.38 to the dollar today, up 17 percent this year.


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