By Marcela Ayres
BRASILIA, March 18 (Reuters) - Brazil's central bank began a long-awaited easing cycle on Wednesday with a cautious 25-basis-point cut, holding off on explicit guidance for next steps as an oil shock tied to the U.S.-Israel war with Iran stoked global inflation fears.
The bank's rate-setting committee, called Copom, unanimously voted to lower the benchmark Selic rate to 14.75%, after five straight meetings holding it at 15%, the highest level since July 2006.
Policymakers signaled in
January that borrowing costs could start to fall this month, but doubts about that guidance mounted this month amid a widening Middle East conflict, which Copom cited throughout its decision statement.
A Reuters poll last week had pointed to a median forecast for a steeper 50-basis-point cut. However, a weekly survey of economists conducted by the central bank showed expectations shifting to a 25-basis-point reduction, also reflected in Brazil's interest rate curve.
The shift in market bets on the eve of the decision came amid widespread doubts over how long oil prices would stay elevated and the risk of second-round inflation effects in Latin America's largest economy, where government stimulus and a tight labor market have meant price pressures are slow to ease.
Policymakers stressed in their decision statement the importance of "serenity and cautiousness in the conduction of monetary policy, so that future steps of interest rate calibration could incorporate new information about the depth and duration of the conflicts in the Middle East."
That cautious tone on the path ahead came as the U.S. Federal Reserve on Wednesday held rates steady and stuck to its projection of a single reduction in borrowing costs this year.
The policy decisions unfolded against a deteriorating global backdrop after oil prices jumped above $100 per barrel in recent sessions, roughly 60% more than the level assumed at the Brazilian central bank's January meeting.
The shock prompted President Luiz Inacio Lula da Silva's government to announce tax cuts and a direct subsidy for diesel, a key input for Brazil's road‑centric logistics, a day before state-run oil firm Petrobras raised the fuel's price.
The surge in oil prices has also reshaped interest rate pricing in recent days, prompting Brazil's Treasury to step in with extraordinary auctions.
(Reporting by Marcela AyresEditing by Brad Haynes)
