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Brazil's Lula voices frustration after modest interest rate cut

BY Reuters | ECONOMIC | 12:42 PM EDT

SAO PAULO, March 19 (Reuters) - Brazilian President Luiz Inacio Lula da Silva said on Thursday he was disappointed that the central bank kicked off an easing cycle with a 25-basis-point interest rate cut instead of a larger move.

* On Wednesday evening, policymakers unanimously voted to lower the benchmark Selic rate to 15% from 14.75%.

* The decision followed five consecutive meetings in which rates were held at their highest level since July 2006 to rein in persistent inflation.

* The central bank held off on explicit future guidance, citing inflation concerns linked to the U.S.-Israeli war on Iran.

* "I was hoping the central bank would cut interest rates by at least 0.5 percentage points, but it cut them by only 0.25 points, saying it's because of the war," Lula said.

* "Come on! Is this war taking place at our central bank? That's impossible," the leftist leader added. (Reporting by Isabel Teles; Editing by Gabriel Araujo)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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