BRASILIA, March 10 (Reuters) - Brazil’s central bank will extend the reduction on banks’ reserve requirements on time deposits to 17% for seven months through to November, maintaining high levels of liquidity in the banking system to support the economy’s recovery from the COVID-19 pandemic.
In a statement, the central bank said the decision took into account the “cyclical persistence of liquidity restrictions on bank borrowing.”
“Thus, it is expected that the credit market will continue functioning normally, without additional restrictions,” the central bank said, adding that around 40 billion reais ($7 billion) would be drained from the system if the ratio was to go back up to 20% as originally planned.
The reduction in the requirement ratio to 17% in March last year was a temporary measure. It was supposed to be raised to 20% in April. Before the pandemic struck a year ago, it was 31%.
Brazil’s central bank was one of the most aggressive of any emerging nation in its response to the pandemic, implementing credit and liquidity measures worth more than 1.2 trillion reais, or 17.5% of gross domestic product.
The current stock of these reserves stands at 205 billion reais, the central bank said.
$1 = 5.67 reais Reporting by Jamie McGeever Editing by Chris Reese and Marguerita Choy