The cut, from the previous level of 8%, in the main Selic rate follows recently unveiled government stimulus¹ measures. 

 

The central bank move is the ninth cut in a row since August last year, as the growth rate has fallen dramatically from the 7.5% recorded in 2012.

 

Now the economy is forecast to grow by less than 2% this year.

 

The monetary² policy committee left the door open for future interest rate reductions, which some analysts³ expect to happen as early as October.

 

"If future conditions were to allow for an additional adjustment of monetary conditions, that movement should be conducted with maximum parsimony," the bank said in the statement. 

 

Policymakers face the delicate act of balancing between boosting growth and keeping inflation in check, after it was pushed up by higher global food prices and tax cuts on car sales. 

 

It reversed a downward trend in the 12-month inflation rate that began in September 2011. The annual inflation currently stands at 5.2%, above the central bank target of 4.5%.

 

Capital Economics analysts said they expected interest rates to remain low for some time as growth would struggle to pick up.

 

"We think that the consensus⁴ expectation for a strong rebound⁵ in growth over the next 6-12 months is overly optimistic and remain of the view that rates will stay lower, for longer, than the market currently anticipates," they said in a note.

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