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LatinNews Daily - 20 April 2020

In brief: Negative outlook on Brazilian banking system, says Moody’s

* International credit ratings agency Moody’s Investors Service has downgraded its outlook on Brazil’s banking system to 'negative' from 'stable', as the shocks from the coronavirus (Covid-19) pandemic erode asset profitability and quality. Moody’s Senior Vice President Ceres Lisboa cited the unexpected drop in economic activity, decrease in household income, and rise in unemployment as straining banks’ revenue and raising their credit costs. Moody’s does note that Brazilian banks’ liquidity will be adequately sustained, and that the measures taken in response to the pandemic have been “timely and balanced”. Lisboa also said that interest rates are expected to stay low for an extended period of time. The president of Brazil’s central bank (BCB), Roberto Campos Neto, avoided giving any indication in an interview aired on 19 April on whether the benchmark interest rate (Selic) will be further lowered from the current rate of 3.75% when the BCB’s monetary policy committee next meets in early May. Campos Neto acknowledged that the economic outlook had deteriorated since the last Selic cut in March.

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