BRASILIA — Brazil’s central bank has adopted a new “forward guidance” strategy to keep interest rates and bond yields low, bring inflation up to target and stimulate the economy’s fragile recovery from the COVID-19 crisis.
The move, outlined last week when the bank cut its benchmark Selic rate to a low of 2% and explained in meeting minutes on Tuesday, highlights a reluctance to cut rates further, and even more so to indulge in bond-buying quantitative easing.
Strictly speaking, it is not a brand new policy for the bank’s rate-setting committee, known as Copom. The practice of reassuring markets that interest rates will not be raised for months or even years was briefly implemented under the presidency of Alexandre Tombini in late 2012 to early 2013, when the Selic was a then-low 7.25%.
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