By Paulo Trevisani and Jeffrey T. Lewis 

BRASÍLIA -- Brazil's central bank cut its benchmark interest rate as expected Wednesday, as consumer price increases remain under control amid a yearslong economic slowdown that has defied government efforts to boost growth.

The bank cut the benchmark Selic rate to a of 5.5% from 6%, with at least one more trim expected to come this year. Economists surveyed weekly by the central bank see the Selic at 5% at year's end.

"The consolidation of the benign scenario for prospective inflation should permit additional adjustment of the degree of stimulus," the bank said in the statement announcing the rate cut.

The central bank's survey predicts inflation will end the year at 3.45%, well below the bank's target of 4.25%. The economists also forecast meager 0.87% gross-domestic-product growth, a pace unlikely to significantly reduce the country's 11.8% jobless rate.

The rate-cutting cycle started in July will take time to show any effect on the real economy, said Western Asset's chief economist in Brazil, Adauto Lima. He said consumers remain cautious, and unused production capacity means businesses have little reason to invest.

"The economy is improving, but very slowly," he said. "There is too much slack, and demand is weak."

That slow growth has prevented business from passing the cost of the recent depreciation of the real against the dollar on to consumers, Mr. Lima added. The real is trading at about 4.10 to the dollar, after reaching 3.74 in July.

Write to Paulo Trevisani at paulo.trevisani@wsj.com and Jeffrey T. Lewis at jeffrey.lewis@wsj.com

(END) Dow Jones Newswires

September 18, 2019 17:57 ET (21:57 GMT)

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