UPDATE 1-Brazil central bank signals no big changes after S&P downgrade

Tue Mar 25, 2014 8:43am EDT

(Adds details from central bank statement, background)

RIO DE JANEIRO, March 25 (Reuters) - Brazil's central bank on Tuesday indicated it will make no major changes in macroeconomic policy after Standard & Poor's cut the country's credit rating closer to speculative grade.

The bank said in a statement it will keep responding to challenges "in a traditional way." That includes making use of a rigorous set of macroeconomic policies and a flexible exchange rate regime, as well as liquidity buffers "to smooth out moves in asset prices."

The central bank has repeatedly said it could use the country's $376 billion worth of foreign reserves to intervene in the foreign exchange market, if needed, to prevent sharp currency moves.

So far, however, the bank has been successful in curbing market volatility by selling currency swaps, derivatives that provide investors with protection against currency losses and that do not require policymakers to use dollars from the reserves.

S&P late on Monday cut Brazil's credit rating to BBB minus, its lowest investment-grade level, citing a deterioration in the country's fiscal performance and prospects of subdued economic growth in the coming years. (Reporting by Walter Brandimarte; Editing by Chizu Nomiyama and Meredith Mazzilli)

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