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Brazil Monetary Policy September 2022

Brazil: COPOM holds fire in September

At its 20–21 September meeting, the Monetary Policy Committee (COPOM) of Bazil’s Central Bank (BCB) decided to maintain the benchmark SELIC interest rate at 13.75%. The move, which markets had largely priced in, was not unanimous; as anticipated at its latest meeting in August, two of the nine members of the committee preferred a final 25 basis point increase. The decision follows a cumulative 1,175 basis point increase in 12 consecutive meetings since March 2021.

The Bank assessed that risks to the inflationary outlook remain in both directions. The Committee also noted that the external environment is volatile amid fears of a global recession. The COPOM took a wait-and-see approach given the lagged effects of monetary policy, which is already significantly in contractionary territory, on inflation. Headline inflation softened both in July and August.

With regard to forward guidance, the Bank reaffirmed its commitment to “persevere until not only the disinflation process is consolidated, but also the anchoring of expectations around its goals”. Consequently, the COPOM emphasized that “future monetary policy steps may be adjusted and will not hesitate to resume the adjustment cycle if the disinflation process does not proceed as expected”. As such, most of our panelists see the benchmark SELIC rate ending the year at its current level of 13.75%.

The next monetary policy meeting is scheduled for 25–26 October.

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