Brazil Monetary Policy October 2019


Brazil: COPOM chops SELIC rate again, taking it to a new historical low

October 30, 2019

At its 29–30 October meeting, the Central Bank of Brazil’s Monetary Policy Committee (COPOM) unanimously decided to cut the benchmark SELIC interest rate from 5.50% to a new historical low of 5.00%. The move was widely expected by market analysts and marked the Bank’s third consecutive cut as part of its efforts to support the economic recovery.

COPOM’s decision was driven by below-target inflation, dovish monetary policy in advanced economies and weak growth dynamics in Brazil. In the accompanying statement, the Bank reiterated that the current economic environment prescribes accommodative monetary policy and that that it expects inflation to remain moderate, coming in around 3.4% at the end of 2019 and 3.6% at the end of next year, in a scenario based on market expectations.

Looking ahead, COPOM maintained a dovish, albeit somewhat cautious, tone. The Bank stated that a “benign scenario” for inflation should allow for another 50-basis point chop ahead; however, it also stressed that “caution” is warranted and that any move will continue to depend on the evolution of economic activity, the balance of risks and inflation. Moreover, the Bank stated that risks to the price outlook exists on both sides, and that a lag in monetary policy transmission and uncertainty over its effectiveness could stoke inflation ahead.

The next monetary policy meeting is scheduled for 10–11 December.

Our panelists are still taking the latest decision into account and an updated Consensus Forecast will be released on 5 November.

Author: Angela Bouzanis, Lead Economist

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