Brazil Monetary Policy January 2016


Brazil: Central Bank leaves SELIC unchanged amid high inflationary pressures

January 20, 2016

At its 20 January 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 move marked the fourth meeting at which the Bank has held interest rates after seven consecutive rate hikes. Market analysts were split on whether the Central Bank would hike or hold rates. The SELIC interest rate remains at a nine-year high amid high inflationary pressures and economic recession in Brazil.

In the brief accompanying statement, the Central Bank outlined that the move is consistent with its assessment of the current balance of risks and uncertainties. However, similar to the last meeting, the decision to hold the SELIC interest rate stable was not unanimous. Six members of the committee voted to keep the SELIC interest rate unchanged, while two members voted to raise the rate by 50 basis points.

Moreover, the Bank’s decision comes against a worsening inflation outlook in Latin America’s largest economy. Despite the number of rate hikes and the economy being stuck in recession, inflationary pressures remain elevated and inflation ended 2015 at the highest level since 2002.

Participants in the LatinFocus Consensus Forecast see the SELIC rate ending 2016 at an average of 14.70%. Panelists see the SELIC rate ending 2017 at an average of 12.46%.

Author: Angela Bouzanis, Lead Economist

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Brazil Monetary Policy Chart

Brazil Monetary Policy January 2016

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

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