BRASILIA Nov 30 Brazil's central bank is widely
expected to keep its moderate pace of interest rate cuts on
Wednesday due to growing political and market uncertainty
clouding the path to recovery from a grueling two-year
A faltering economy has raised pressure on the bank to keep
easing policy, but market turmoil triggered by the election of
Donald Trump to the White House and a political scandal at home
have investors betting on caution.
Fifty-four out of 64 analysts surveyed by Reuters until
Tuesday believe the bank will cut its benchmark Selic rate
by another 25 basis points to 13.75 percent, its
lowest in over a year. The remainder forecast a rate cut of 50
Trump's surprise victory on Nov. 8 has dragged down the
Brazilian currency by more than 7 percent on expectations
his promises for fiscal stimulus could raise U.S. interest rates
and spark a flight of capital from riskier markets. A weaker
exchange rate raises pressure on inflation that, despite a
recent slowdown, remains well above the 4.5 percent official
More recently an ethics scandal within President Michel
Temer's cabinet has raised fears he could lose support in
Congress to push ahead austerity reforms key to allow the
central bank to keep lowering some of the world's highest
"At this moment, the board will most likely opt for a more
cautious decision taking into consideration the uncertain
outlook of the global economy," analysts with Banco Fibra wrote
in a research note.
Still, many analysts predicted the bank would step up
monetary easing at its next meeting in January as activity
continues to disappoint in what could be the country's worst
recession on record.
Initial hopes of a faster recovery from the recession after
the impeachment of leftist President Dilma Rousseff have fizzled
with unemployment on the rise and industrial output down.
Official data on Wednesday is likely to show that the
economy shrank 0.8 percent in the third quarter, according to a
Reuters poll, its seventh straight quarterly contraction.
The government last week cut its 2017 growth estimate to 1
percent from 1.6 percent, but some analysts are predicting
stagnation next year with lingering doubts over the
administration's capacity to shore up its depleted public
(Reporting by Alonso Soto; Editing by Meredith Mazzilli)