Brazil bank CEOs back further easing after fourth straight rate cut

SAO PAULO, Aug 6 (Reuters) – The chief executives of two of Brazil’s biggest banks said on Thursday they expect further interest-rate cuts, which would be good for the economy.

Brazil’s ​central bank cut interest rates on Wednesday by 25 ‌basis points to 14%, the fourth cut in a row, as recent data pointed to slower inflation and a cooling economy.

Brazil’s real interest rates are still among the highest in the world.

Bradesco’s CEO Marcelo Noronha told reporters that ‌the ​central bank’s restrictive monetary policy had already ⁠achieved its intended effects.

“It has ⁠driven inflation down, which is what we’re seeing in the core inflation figures. I see no reason why (rate-setting committee) Copom wouldn’t cut rates, though the magnitude and pace remain to be ​seen,” he said.

Annual inflation in Latin America’s largest economy slowed to 4.52% in the 12 months through mid-July, edging closer to ⁠the central bank’s target of 3%, ⁠plus or minus 1.5 percentage points.

Itau Unibanco’s CEO Milton ​Maluhy Filho said in an interview with GloboNews that Brazil must ​work to bring interest rates down to single-digit levels, adding ‌that the country needed to create the conditions for structurally lower borrowing costs.

Banks tend to benefit from higher interest rates, but some major lenders in Brazil have already pointed to a deterioration in ⁠macroeconomic conditions amid elevated borrowing costs, which also contributed to higher household indebtedness and delinquency.

“High interest rates are bad for everyone because they slow ⁠economic activity, curb ‌business investment and weigh on household spending,” Maluhy ⁠said.

Brazil last had single-digit borrowing costs in early ​2022, ‌when they were raised from 9.25% to 10.75% ​amid a ⁠spike in inflation. Policymakers had previously taken the benchmark Selic rate to 2% during the COVID-19 pandemic.

This week, Bradesco reported a 16% rise in second quarter profit, while Itau said its second-quarter earnings rose 8%.

(Reporting by Isabel Teles and Paula Arend Laier; Editing by Gabriel Araujo ​and Susan Fenton)