Brazil Monetary Policy


COPOM slashes interest rates by 50 basis points

At its meeting on 31 August, the Central Bank Monetary Policy Committee (COPOM, Comite de Politica Monetaria) decided to cut the SELIC interest rate by 50 basis points to 12.00%. The move was not unanimous, as two out of seven members of the Committee voted to leave the interest rate at 12.50%. The rate cut surprised market analysts, who had expected that the SELIC rate would remain unchanged in August. The move marked the first cut in interest rates since July 2009 and ends a period of rate increases that commenced in April 2010. A decline in interest rates aims to provide a cushion for the domestic economy as the global economic recovery falters. The decision, however, spurred new inflation concerns. Figures for mid-August consumer prices (IPCA-15), released on 19 August, showed that inflation continued to accelerate and stepped up to 7.1% (mid-July: 6.8%).


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