Brazil Monetary Policy


Brazil: Central Bank continues to tighten reins

March 2, 2011

On 2 March, the Central Bank Monetary Policy Committee (COPOM, Comite de Politica Monetaria) unanimously decided to raise the target for the benchmark SELIC interest rate by 50 basis points to 11.75%, in a decision broadly expected by market analysts. In a very brief communique, the COPOM stated that the move was aimed at resuming the process of ?adjustment of monetary conditions?. The decision was announced against a backdrop of rising inflation expectations, as inflation is quickly approaching the upper limit of the Central Bank's target of 4.5% 2.0 percentage points set for this year. Since last December, monetary authorities announced a round of so-called macro-prudential measures, such as adjustments in banks' reserve requirement ratios (RRR) and capital requirements for long-term loans (excluding mortgages) to individuals. Combined with traditional policy actions, the measures are beginning to show results, with the daily average of credit operations decelerating markedly.

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