Economy Minister Guedes unveils cuts in banks’ reserve requirements

Brazil’s Economy Minister Paulo Guedes said the Central Bank is likely to continue reducing the rate for the collection of banks’ reserve requirements by over $25.8 billion.

Reserves are the portion of the deposits banks must make on an at the Central Bank. They are one of the tools the monetary authority uses to regulate the amount of money circulating in the economy. By lowering the rate, it makes more funds available for loans.

“We’re driving the state away from the credit market,” Guedes said after meeting with Senate head Davi Alcolumbre, in Brasília. He was referring to the Wednesday (Jun 26) decision by the Central Bank to cut the rate from 33 to 31 percent. The reduction, to be made effective next month, is expected to unblock $4.16 billion. “Here comes another [$25.8 billion] from the reserve requirements further ahead,” the minister said.

After his statement, the Central Bank reported that the move is among on the bank’s agenda, but did not specify the deadlines or values to be made flexible. “The action is in progress, with no deadlines and amounts set,” a note released by the bank reads. “The Central Bank will not disclose decisions and regulations in advance.”