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Brazil Monetary Policy October 2022

Brazil: COPOM stays put again in October

At its 25–26 October meeting, the Monetary Policy Committee (COPOM) of Brazils Central Bank (BCB) decided once again to maintain the benchmark SELIC interest rate unchanged at 13.75%, mirroring Septembers move. The decision, which markets had already priced in, was unanimous.

The Bank assessed that both upside and downside risks to the inflationary outlook remain. Moreover, global uncertainty has increased amid fears of a worldwide slowdown. Domestically, inflation moderated further— despite remaining elevated—and data shows economic growth has cooled. As such, the COPOM took a more dovish stance in its September and October meetings and is waiting to assess the impact of the cumulative 1,175 basis points worth of increases, given its lagged effect on both inflation and the economy.

Regarding forward guidance, the Bank did not provide hints about future policy moves in its communiqué. It did, however, reaffirm its commitment to “persevere until not only the disinflation process is consolidated, but also the anchoring of expectations around its goals”. Consequently, the COPOM stated it would resume its policy tightening if the deceleration of inflation does not progress as desired. Virtually all of our panelists see the benchmark SELIC rate ending the year at its current level of 13.75%.

The next monetary policy meeting on 6–7 December is the last one scheduled for the year.

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