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Brazil's central bank holds rates at 2.00%, keeps forward guidance intact

Brazil's central bank kept its key interest rate at a record-low 2.00% on Wednesday and maintained its "forward guidance" pledge to keep rates lower for longer, but noted that it is closely monitoring the recent rise in inflation.

BRASILIA, Oct 28 (Reuters) - Brazil's central bank kept its key interest rate at a record-low 2.00% on Wednesday and maintained its "forward guidance" pledge to keep rates lower for longer, but noted that it is closely monitoring the recent rise in inflation.

In a statement accompanying the unanimous decision, the bank's rate-setting committee known as 'Copom' said food and oil prices and a persistently weak exchange rate have fueled short-term inflationary pressures, although the shock is "temporary".

The decision to hold the Selic rate at 2.00% was expected by all 31 economists surveyed in a Reuters poll.

Policymakers did not close the door on more rate cuts, but said any room for further easing is small. It said conditions for its forward guidance remained in place and inflation expectations are "significantly" below target for the relevant policy horizon out to 2022.

Using two scenarios of varying interest rate and exchange rate inputs, Copom sees inflation reaching 3.1% this year and rising as high as 3.8% in 2022. Last month, Copom projected inflation of 2.1% this year and 3.3% in 2022.

(Reporting by Jamie McGeever; editing by Stephen Eisenhammer)

((jamie.mcgeever@thomsonreuters.com; +55 (0)11 97189 3169; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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