Brazil: Central Bank tightens reins at first meeting of 2011
January 19, 2011
On 19 January, the Central Bank Monetary Policy Committee (COPOM, Comite de Politica Monetaria) unanimously decided to raise the target for the benchmark SELIC interest rate by 50 basis points to 11.25%, in a decision broadly expected by market analysts. This was the first meeting convened by Alexandre Tombini, the new governor of the Central Bank of Brazil (BCB). In the minutes released on 27 January, the COPOM mentions that the inflation scenario deteriorated since the last meeting. The deterioration mainly reflects higher commodity prices. In addition, the Central Bank adopted several measures to curb the excessive rise of the Brazilian real. The BCB also stated that wages have risen faster than productivity in 2010, reflecting an imbalance between the growth of demand and supply. The Bank highlighted that the prudential measures recently announced are already leading to tighter credit conditions, with the daily average of credit operations falling in December.