Brazil Monetary Policy December 2017


Brazil: Central Bank cuts SELIC rate to 7.00%

December 7, 2017

At its 6 December meeting, the Central Bank’s Monetary Policy Committee (COPOM, Comité de Politica Monetaria) decided to cut the benchmark SELIC interest rate by 50 basis points, a smaller cut than at its previous meeting. The SELIC rate now rests at 7.00%. The committee’s decision matched market analysts’ expectations and marked the 10th consecutive cut as the Central Bank moves to support economic growth.

Favorable inflation data along with an improving economy, the primary factors that drove the decision, have given the Bank space to loosen monetary conditions. Price pressures have remained broadly stable, and inflation rose to just 2.7% in October after remaining at an 18-year low of 2.5% in both August and September. The Bank updated its inflation forecast; it now sees inflation at around 2.9% in 2017, in a scenario where the SELIC rate ends the year at 7.00%. It stressed that there are both upside and downside risks to the inflation outlook, highlighting in particular that it could be affected by delays in the economic reform process and in macroeconomic readjustments.

The Bank’s statement highlighted that a continuation of the easing cycle will depend on the strengthening of the economy going forward, as well as on the evolution of inflation expectations. The SELIC rate has fallen rapidly this year, and the economy has improved substantially, meaning that the need for an aggressive cycle is waning.

FocusEconomics participants see the SELIC rate closing 2018 at 7.02% and 2019 at 7.93%.

Author: Angela Bouzanis, Senior Economist

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Brazil Monetary Policy Chart

Brazil Monetary Policy November 2017

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

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