Brazil Monetary Policy


Brazil: Central Bank keeps interest rate unchanged in September

September 3, 2014

At its 3 September meeting, the Central Bank’s Monetary Policy Committee (COPOM, Comite de Politica Monetaria) decided to leave the benchmark SELIC interest rate unchanged at 11.00%, where it has been since April. The decision was consistent with market expectations.

The Bank’s statement was almost exactly the same as the one that followed the prior meeting that took place on 16 July and COPOM’s choice to keep the SELIC interest rate at 11.00% was voted unanimously by the committee. The decision reflects the Bank’s commitment to curb inflation, even amidst contracting economic growth rates. Last week, Brazil released Q2 data that confirmed that the country is now in a technical recession after contracting in both Q1 and Q2 of this year.

Recently, the combination of negative growth and high inflation has gained presence within the economic debate in the country. Presidential elections are taking place in October, and candidates have been debating the fact that the country might be approaching a ”stagflation” scenario, although Central Bank Governor Alexandre Tombini denied this possibility in a speech at the Senate on 5 August. Moreover, Brazil’s Central Bank is not independent from the government, and the head of the Bank is likely to change if the government does. Looking forward, the market expects the SELIC interest rate to remain unchanged until after the new government is formed.

LatinFocus Consensus Forecast participants see the SELIC rate ending 2014 at an average of 11.11%. Panelists see the SELIC rate ending 2015 at an average of 11.92%.

Author: Angela Bouzanis, Senior Economist

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Brazil Monetary Policy Chart

Brazil Monetary Policy September 2014

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

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