Brazil Monetary Policy


Central Bank cuts SELIC rate to new record low

At its 29 August meeting, the Central Bank's Monetary Policy Committee (COPOM, Comite de Politica Monetaria) decided to cut the benchmark SELIC interest rate by 50 basis points to 7.50% in a unanimous vote, in a decision widely expected by the market. The move followed a similar rate cut in July and represents the ninth consecutive meeting in which policymakers opted to cut interest rates. In the minutes released on 6 September, policymakers stressed that any further easing in monetary policy should be conducted with "maximum parsimony", which might be interpreted as a signal that the Central Bank has concluded its year-long easing cycle. In addition, the Bank stated that it expects a gradual recovery in economic activity going forward, which should benefit from various stimulus measures recently introduced by the government, better investment prospects as well as improving confidence in the economy. Regarding price developments, the Central Bank pointed that inflation in both 2012 and 2013 will likely overshoot its mid-point target of 4.5%.


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