MercoPress, en Español

Montevideo, November 15th 2018 - 06:20 UTC

In a split vote, Brazil's central bank leaves Selic rate unchanged; pressure for an increase

Thursday, November 26th 2015 - 16:57 UTC
Full article
Copom voted 6-2 to maintain its benchmark interest rate at 14.25%, its highest in nine years. Two of the 8-member voted to raise the Selic to 14.75% Copom voted 6-2 to maintain its benchmark interest rate at 14.25%, its highest in nine years. Two of the 8-member voted to raise the Selic to 14.75%

Brazil's central bank kept interest rates on hold for the third straight meeting on Wednesday in a split vote that shows policymakers are uneasy about inflation, a worsening recession which might lead to a raise in rates early in 2016.

 The bank's monetary policy committee, Copom, voted 6-2 to maintain its benchmark interest rate at 14.25%, its highest in nine years. Two of the 8-member Copom voted to raise the Selic to 14.75% while the rest voted for no change.

The brief report said that given the current macroeconomic situation and inflation prospects, Compom decided to keep the Selic rate at 14.25%, with six votes supporting no change and two for a 0.50 increase of the rate. The two dissident votes were from Sidnei Correa Marques and Tony Volpon.

The decision to leave rates steady eases pressure on President Dilma Rousseff as she tries to defuse a political crisis that threatens her plans to plug a widening fiscal deficit and regain investors' confidence. However, the unusual split decision is the strongest indication yet that the central bank could resume tightening if inflationary pressures linger.

In another signal the bank removed from its statement a previous reference to the need to keep rates on hold for some time to bring inflation back to the official 4.5%.

The central bank had until recently signaled that it may hold rates steady for some time in hopes that the country's worst recession in 25 years drags down prices. But a weaker Brazilian real and Rousseff's inability to reduce the fiscal deficit amid political upheaval are making the central bank's job even more difficult.

Even with the economy in free fall, inflation has continued to accelerate, piercing 10% in the 12 months to mid-November for the first time in 12 years due an increase in fuel and food prices. The official target ranges from 2.5% to 4.5%.

The surprise arrest of Rousseff's leader in the Senate Delcidio do Amaral on Wednesday for allegedly obstructing a massive corruption investigation could further complicate her efforts to pass an unpopular austerity package.

Many lawmakers from Rousseff's alliance are blocking the approval of tax hikes and spending cuts that they say will only deepen a recession that could extend into 2016.

Categories: Economy, Brazil.

Top Comments

Disclaimer & comment rules

Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!