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Montevideo, October 7th 2022 - 03:06 UTC

 

 

With inflation soothing, Brazilian central bank leaves basic Selic interest rate unchanged at 13,75%

Thursday, September 22nd 2022 - 10:01 UTC
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Eight month inflation in Brazil has risen to 4,29% while in the last twelve months has climbed to 8,73% Eight month inflation in Brazil has risen to 4,29% while in the last twelve months has climbed to 8,73%

Brazil's Central Bank Monetary Policy Committee (Copom) decided on Wednesday to keep its basic Selic interest rate unchanged at 13,75%, putting an end to twelve consecutive increases which took off in 2021 with the purpose of bringing down inflation.

Copom said in a release it followed market expectations, but will remain vigilant, checking on the strategy to keep the basic interest rate unchanged for a sufficiently long period, expecting it to ensure the convergence of inflation to the official target.

Copom is expected to again meet in a month's time to monitor the basic rate and will not hesitate in returning to the adjustment cycle if inflation does not tame, or on the contrary keeps the rising trend.

Exposing the degree of uncertainty regarding the Brazilian and global economies, two of the Copom nine member votes for a residual 25 basis points increase, according to the official release.

Copom has hiked the Selic rate twelve consecutive times since March 2021 when the basic rate stood at a historic low of 2% to prompt consumption and investments in the midst of the pandemic. The current rate of 13,75%, is the highest since January 2017.

The increasing trend of the Consumer Prices Index became one of the main challenges of the administration of president Jair Bolsonaro, who is running for reelection next month, although tailing his main opponent Lula da Silva in public opinion polls.

Eight month inflation in Brazil has risen to 4,29% while in the last twelve months has climbed to 8,73%. However CPI in August actually fell 0,36%, the lowest for the month in 24 years and the second month with negative CPI, basically as a consequence of the drop in fuel prices. The Central bank inflation target for this year is 3,5%.

As to GDP, the Brazilian economy has done better than expected in the second quarter, and is estimated to reach 2,65% in the twelve months. Nevertheless the Central Bank Focus survey shows that financial institutions estimate that 2023 growth will remain standing but the Selic rate should be at 11,25% by the end of the year.

 

Categories: Economy, Politics, International.

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