Brazil Monetary Policy August 2016

Brazil

Brazil: Central Bank keeps SELIC on hold again

August 31, 2016

At its 31 August meeting, the Central Bank’s Monetary Policy Committee (COPOM, Comite de Politica Monetaria) decided to leave the benchmark SELIC interest rate unchanged at 14.25%. The meeting marked the second monetary policy decision for the new COPOM, which is led by Central Bank President Ilan Goldfajn. The rate was kept unchanged for the ninth consecutive meeting and the decision was in line with market expectations. The rate remains at a near-decade high, against a backdrop of elevated inflationary pressures and long-lasting economic recession.

The Bank commented that recent data point to a stabilization of the Brazilian economy although it continues to lack momentum. The Bank revised up its 2016 inflation forecast, noting that it now sees inflation ending the year at 7.3% (previous projection: 6.8%). By the end of next year, the Bank projects inflation to recede to its 4.5% target. At the same time, the COPOM highlighted several upside and downside risks to its inflation outlook and concluded that holding the SELIC rate was appropriate given the current information. The Bank also emphasized that its monetary policy stance was neutral and that easing monetary policy would only become an option if economic conditions improved.

Participants in the LatinFocus Consensus Forecast see the SELIC rate ending 2016 at an average of 13.51%. Panelists see the SELIC rate ending 2017 at an average of 11.05%.


Author: Teresa Kersting, Economist

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Brazil Monetary Policy August 2016 0

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


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