On Wednesday, the Monetary Policy Committee (Copom) of Brazil’s Central Bank decided to keep Selic’s key interest rate at 13.75 percent per annum, in line with financial market expectations.
The decision was not unanimous, as two Copom members voted to raise the rate to 14 percent yearly.
The move marks the end of the monetary tightening cycle initiated in March 2021, when the Selic rate was 2 percent per year.
In announcing the move, Copom said in a statement that “consumer inflation remains elevated despite the recent decline in the most volatile items and the impact of fiscal measures.”
“The Committee has again chosen to emphasize the six-quarter horizon, which reflects the relevant horizon, smoothing the direct effects of the tax changes but also incorporating their secondary effects,” the statement said.
Inflation expectations for 2022, 2023 and 2024 are around 6%, 5% and 3.5%, respectively.
Among the risks to the inflation scenario, Copom highlighted the continued persistence of global inflationary pressures and uncertainty about the future of the country’s fiscal framework and additional fiscal stimulus.
The exact reasons for the decision and the way forward will be explained in the minutes of Wednesday’s meeting, which will be published next week.