Brazil: Central Bank leaves rate unchanged in May
May 29, 2014
At its 28 May 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%, pausing the uninterrupted tightening cycle of 375 basis points that started in April 2013. Nonetheless, the markets had expected that the Bank would make this decision due to disappointing economic data and a slight moderation in monthly variations in consumer prices.
The Bank did not provide a detailed accompanying statement as it had in previous releases. After last month’s hike, analysts expected that the tightening cycle in monetary policy would likely come to an end since the Bank’s Chief Alexandre Tombini announced the possibility of a, “pause in rate increase campaign,” on 10 April. In a post-meeting statement, monetary authorities stated that they decided to leave the SELIC rate unchanged “at the moment”, which suggests that that the Bank is leaving the door open for new interest rates hikes in the coming months.
Analysts expect that, going forward, the COPOM will wait to assess the effects of the adjustments that have been implemented so far. If required, monetary authorities will implement additional interest rate increases in order to anchor inflation expectations and to ensure a stable inflation outlook.