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Brazil Monetary Policy December 2022

Brazil: COPOM holds fire for a third consecutive time in December

At its last meeting of 2022 on 6–7 December, the Monetary Policy Committee (COPOM) of Brazils Central Bank (BCB) decided to maintain once again the benchmark SELIC interest rate unchanged at 13.75%. The unanimous decision, which markets had widely expected, marked the third consecutive hold since September.

The Bank acknowledged that while both headline and core inflation remain high, they have continued to trend down. Regarding activity, the Bank noted that the external environment remains highly uncertain and volatile, and added that national accounts and high-frequency data show domestic economic activity has started to slow down. In turn, the Bank continued with the less aggressive stance it shifted to in September and stood pat at its December meeting; it is assessing the impact of the cumulative 1,175 basis points worth of increases since March 2021.

In its communiqué, the Bank did not provide hints about future policy moves. It stated, however, that risks to the inflation outlook remain in both directions. The COPOM affirmed it would monitor fiscal policy developments and their effect on inflation, as it remains committed to “persevere until not only the disinflation process is consolidated, but also inflation expectations anchor close to the target”. Consequently, the COPOM stated it would resume its policy tightening if inflation does not decelerate as desired. Virtually all of our panelists see the benchmark SELIC rate ending 2023 lower than the current 13.75%.

The next monetary policy meeting is scheduled for 31 January–1 February.

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