Analysts and economists are so sure that Brazil’s central bank will cut its policy interest rate this evening that they will barely pay it any attention – unless, that is, the bank surprises with a cut of 25 basis point from the current 11 per cent a year, instead of the 50 bps cut widely predicted.

But they will be paying very close attention to the short statement that accompanies each decision, as well as the full minutes of Tuesday and Wednesday’s monetary policy committee meeting to be published on January 26.

This from BNP Paribas on Wednesday:

Any hints of a possible reduction in the pace of rate cuts, or even the end of the easing cycle, will lead market to reprice the IRS curve. Although this is not our base-case scenario, in such an event, we would reassess our Jan’13xJan’15 PRExDI steepener. Our economic team calls for a 50bp rate cut, in line with consensus, and two more consecutive cuts of 50bp taking the Selic rate to 9.50%.

Readers will remember that Brazil shocked the world when it became the first big emerging market to cut interest rates last August (leaving aside Turkey’s unorthodox approach to the subject) as its leaders began to worry about a global slowdown.

Whether that was playing to the gallery or an expert bit of tea leaf reading, it has turned out to be timely. Brazil’s growth edged into negative territory in the third quarter of last year. Many economist think growth in the fourth quarter was only marginally positive, leaving room for another 50 bps cut on Wednesday evening with more to follow.

A steady flow of interest rate cuts is just what the government would love to present to voters. Now may be its chance. But even if it does deliver, Brazil will still have one of the highest policy rates in the world – and market lending rates in high double or even triple digits.

What to do about that? It’s the same old story: streamline tax and labour laws and reduce the presence of the state. While rate cuts are right around the corner, fundamental reform remains a long way off.

Related reading:
A high-flyer now flags, FT
Brazil slowdown presents chance to reform, FT
Brazil moves up a place in GDP, beyondbrics