Brazil Central Bank Reduces Interest Rates on Rediscount Lines

Brazil’s central bank reduced interest rates it charges banks that tap its rediscount credit line after cutting borrowing costs to a record low.

Financial institutions will be charged the benchmark rate, which is at 7.25 percent, plus 1 percent a year for one-day loans, the central bank said in a statement posted on its website. Previously, they were charged the Selic rate plus 6 percent a year. For loans of as much as 15 days, the rate will be Selic plus 2 percent, instead of 4 percent.

Brazil has reduced its benchmark interest rate by 525 basis points since August 2010, more than any other Group of 20 nation. The decision to reduce rediscount rates seeks to reflect the drop in borrowing costs, the central bank said.

Policy makers also reduced the fine banks that fail to meet their reserve requirements must pay on overdue deposits to Selic plus 4 percent, down from Selic plus 14 percent, the central bank said.

To contact the reporter on this story: Arnaldo Galvao in Brasilia Newsroom at agalvao1@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net