Why Brazil's cenbank will end 2018 with loose monetary policy

Brazil's central bank is expected to leave the Selic base interest rate unchanged when deciding on monetary policy this week.

The Selic is at a record-low of 6.5% and the monetary policy committee will announce this year's last rate decision late on Wednesday.

"We expect the Copom to leave the policy rate unchanged at 6.50% and to possibly preserve the previous meeting's non-committal open-ended guidance with regards to the next policy rate moves," said Alberto Ramos, an economist at Goldman Sachs.

"Given the recent benign inflation prints, decline in 2018-19 inflation expectations, modest real activity figures, and the recent external developments related to US-China trade relationship and the outlook for Fed policy, we are of the view that if there are any changes to the forward guidance we expect them to be in the direction of turning it slightly more dovish, eventually signaling rates on hold at the current level for a longer period of time," he added.

Annual inflation slowed to 4.05% last month from 4.56% in October, bringing the rate back within the central bank's 4.5% target.

The Selic is expected to end 2019 at 7.50%, according to a weekly central bank survey with 100 economists.

The same economists cut their GDP growth forecast for this year to 1.3% from 1.32% and kept their 2019 forecast unchanged at 2.53%.