Brazil's central bank lowered its benchmark Selic rate for a fifth consecutive meeting to a new record low as it sought to keep inflation near target levels amid what it sees as a gradual recovery in Latin America's largest economy.

Members of Banco Central do Brasil's monetary policy committee, known as Copom, voted unanimously to reduce the Selic rate by 25 basis points to 4.25%. The bank said the rate cut is consistent with the convergence of inflation to its target through 2021.

Copom's inflation projections stood at 3.5% for 2020 and 3.7% for 2021, under the assumption that the Selic rate would be kept at 4.25% until the end of 2020, then raised to 6.00% in 2021. An alternative scenario where the Selic rate is kept at 4.50% would yield inflation projections of 3.5% for 2020 and 3.8% for 2021.

The bank identified two-way risks to its baseline inflation scenario, including the high level of economic slack in the Brazilian economy producing lower-than-expected inflation, and the delayed effect of monetary stimulus yielding higher-than-expected price increases. Other risks included changes in credit and capital markets, a downgrade in the outlook for emerging economies, and disruptions to reforms and "necessary adjustments" to Brazil's economy, the central bank said.

"The Copom judges that the current stage of the business cycle recommends caution in the conduct of monetary policy," the central bank said, adding that current economic conditions still warranted a "stimulative" monetary policy.