Brazil cuts rates for fifth straight time as economy cools

Brazil's central bank lowered its benchmark interest rate by 25 basis points on Wednesday, its fifth consecutive cut, as evidence of a cooling economy accumulated and policymakers left the pace of future easing open.

The rate-setting committee, Copom, voted unanimously to bring the Selic rate to 13.75%. The move matched the forecasts of 48 of 51 economists surveyed, with the remaining three expecting rates to be held steady.

In its policy statement, the committee repeated that the full scale of the adjustment cycle would be determined by incoming information, with the aim of steering inflation back to target. The language differed only marginally from the previous meeting's guidance.

The decision landed on the same day the U.S. Federal Reserve lifted its benchmark rate to a range of 3.75% to 4.00% and signalled more increases ahead.

Wednesday's cut extends a cautious easing cycle that began in March and has delivered 125 basis points of reductions so far, leaving Brazil with one of the highest real interest rates among major economies.

Attention now turns to Copom's next meeting in early November, scheduled just days after a presidential runoff that is expected to be closely fought between incumbent President Luiz Inacio Lula da Silva, who is seeking re-election, and Senator Flavio Bolsonaro, son of former President Jair Bolsonaro.

Since the bank last met, data have pointed to a clearer loss of momentum in Latin America's largest economy. Second-quarter gross domestic product figures showed a slowdown, and household consumption contracted. Policymakers said recent indicators suggested activity was moderating gradually, though from a resilient level.

Inflation has also eased, even as the labour market remains tight. At the same time, higher oil prices have returned as a concern amid renewed conflict in the Middle East, and market inflation expectations for next year have crept up, drifting further from the official 3% target.