Brazil Balks at Rate Rise, Picks Recession Fight Over Prices

In a surprise decision, Brazil balked at raising interest rates as it wagers the nation’s worst recession in decades will be enough to damp double-digit inflation.

Just 15 of 57 analysts surveyed by Bloomberg predicted the outcome, which marks the fourth straight meeting that borrowing cost were kept unchanged at 14.25 percent. The remainder of economists expected an increase of 25 or 50 basis points, and two members of the eight-person central bank board voted for a 50-point hike to 14.75 percent.

Since the bank’s last meeting in November, surging inflation and hawkish central bank commentary had most observers anticipating a half-point increase Wednesday. Upsetting those expectations, the International Monetary Fund on Tuesday published revised forecasts for Brazil, estimating a deeper and longer recession that central bank President Alexandre Tombini dubbed “significant.” Policy makers said in a statement accompanying the decision they took into consideration increased uncertainties, especially those abroad.

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