The city on the beach in Brazil

Brazil Monetary Policy June 2022

Brazil: COPOM meets expectations and hikes rates for 11th consecutive time in June

At its 14–15 June meeting, the Monetary Policy Committee (COPOM) of Brazil’s Central Bank (BCB) unanimously decided to raise the benchmark SELIC interest rate by 50 basis points—as largely expected by markets—bringing it to 13.25%. The move, which marked the 11th consecutive raise, pushed the rate to its highest level since December 2016, and amounted to a total 1,125 basis points of rate increases since the tightening cycle began in March 2021.

The decision to further tighten its stance was driven by the need to rein in stubbornly high inflationary pressures. The Bank once again upwardly revised its end-2022 inflation forecast to 8.8% (previously projected: 7.3%), and its end-2023 forecast to 4.0% (previously: 3.4%). Meanwhile, core inflation projections remain well above the Bank’s 3.50% and 3.25% targets for 2022 and 2023, respectively. That said, the Bank slowed its tightening pace due to a deterioration of the global economic environment and a downward revision of global growth projections. Additionally, the tightening cycle is now at an advanced stage and the Bank wants to first assess the impact of the cumulative increases.

With regard to forward guidance, the Committee stated in its communiqué that “given its inflation projections and the risk of a deanchoring of long-term expectations, it is appropriate to continue advancing in the process of monetary tightening significantly into even more restrictive territory”. It also added that “it will persist in its strategy until the disinflation process consolidates and anchors expectations around its targets”. The Committee affirmed that it will deliver another rate increase—of 50 basis points or less—at its next monetary policy meeting, scheduled for 2–3 August. Accordingly, virtually all of our panelists have penciled in a 50 basis point increase in Q3.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest