Brazil Monetary Policy February 2018

Brazil

Brazil: Central Bank cuts SELIC rate to 6.75%, signals end of easing cycle

February 7, 2018

At its 7 February meeting, the Central Bank of Brazil’s Monetary Policy Committee (Comité de Politica Monetaria, COPOM) decided to cut the benchmark SELIC interest rate by 25 basis points, a smaller cut than the 50 basis-point reduction it made at the previous meeting. The SELIC rate now rests at 6.75%—a record low. The committee’s decision matched market analysts’ expectations and marked the 11th consecutive cut in the Bank’s easing cycle.

Historically low inflation has afforded the Central Bank space to reduce rates to support the economic recovery. In the accompanying press release, the Bank commented that the behavior of inflation is favorable and refrained from revising its forecasts. The Bank sees inflation ending 2018 around 4.2%, in a scenario where the SELIC rate ends the year at 6.75%.

The Bank’s forward guidance suggested that this was likely the final cut in the easing cycle, if incoming data is as expected. The SELIC rate is now at a historical low and should be sufficient to stroke growth. Moreover, pre-election uncertainty could cause the Bank to take a more cautious stance and refrain from changing interest rates. However, the Bank did still highlight that upside and downside risks to the outlook persist and left a window open for a surprise move. Commenting on the outlook for policy rates, analyst João Pedro Ribeiro adds:

“We continue to believe that: the current level of the Selic rate, the prospects for the output gap and inflation conditions should allow the BCB to remain on hold throughout 2018, before normalization to higher rates next year. The pace of narrowing of the very wide output gap, the behavior of inflation expectations going into an uncertain electoral process and the conditions in the external environment will all be key in determining when and how such normalization begins.”

FocusEconomics Consensus Forecast participants see the SELIC rate closing 2018 at 6.81% and 2019 at 7.96%.


Author: Angela Bouzanis, Lead Economist

Sample Report

Looking for forecasts related to Monetary Policy in Brazil? Download a sample report now.

Download

Brazil Monetary Policy Chart


Brazil Monetary Policy February 2017 0

Note: SELIC target rate (Taxa SELIC meta) in %.
Source: Central Bank of Brazil (Banco Central do Brasil).


Brazil Economic News

  • Brazil: Real plunges to new record low in February

    February 17, 2020

    The Brazilian real continued its downward spiral in early February, hitting an all-time low of BRL 4.36 per USD on 12 February, marking an over 6.0% depreciation over the prior month.

    Read more

  • Brazil: Economic activity declines at quickest pace in 10 months in December

    February 14, 2020

    Economic activity fell 0.3% in seasonally-adjusted month-on-month terms in December, contrasting November’s revised 0.1% increase (previously reported: +0.2% month-on-month) and missing expectations of a softer 0.2% drop. On an annual basis, economic activity rose 1.3% in December up from a downwardly revised 0.8% in November (previously reported: +1.1% year-on-year), while annual average growth in economic activity was stable at 0.9%. Looking ahead, economic output is expected to gain some impetus on the back of a looser monetary stance, which should in part fuel fixed investment.

    Read more

  • Brazil: Retail sales fall in December

    February 12, 2020

    Retail sales, excluding cars and construction, fell 0.1% over the prior month on a seasonally-adjusted basis in December, contrasting November’s revised 0.7% increase (previously reported: +0.6% month-on-month).

    Read more

  • Brazil: Real plunges to new record low in February

    February 10, 2020

    On 7 February, the Brazilian real fell to a fresh record low against the U.S. dollar, ending the day at 4.32 per USD, which marked a 6.2 depreciation over the same day in January.

    Read more

  • Brazil: Inflation eases in January

    February 10, 2020

    Consumer prices increased 0.21% month-on-month in January, following December’s sharp 1.15% increase.

    Read more

More news

Search form