Whiffs of interest rate cuts in Brazil

As impeachment of President Dilma Rousseff grows more likely, chances are rising that Brazil’s central bank may also go under new management in a matter of months.

But regardless of whether central bank chief Alexandre Tombini stays in office for long, prospects of interest rate cuts have found their way back on investors’ radar.

Brazil’s economy is locked in its worst recession in decades, possibly in more than a century. And yet Brazil’s central bank since last year has stubbornly held the benchmark Selic rate at a near decade-high of 14.25 percent, one of the highest of in the world.

The bank’s logic goes that along with the punishing economic downturn, restrictive rate policy will also help force inflation, currently at 10 percent, down sharply.

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