Brazil 10-Year Bond Yield (%, eop)

COPOM holds fire for a fourth consecutive time in February

At its first meeting of 2023 on 31 January–1 February, the Monetary Policy Committee (COPOM) of Brazil’s Central Bank (BCB) decided to once again keep the benchmark SELIC interest rate unchanged at 13.75%. The unanimous decision, which markets had largely priced in, marked the fourth consecutive hold since September 2022.

The Bank acknowledged that while headline and core inflation remain high, they have cooled. Regarding activity, the BCB said that high-frequency data continued to corroborate the slowing down of domestic economic activity as expected. Additionally, the BCB noted that uncertainty is markedly higher now. As such, the Bank continued its recent wait-and-see approach to continue assessing the impact of its cumulative 1,175 basis points worth of increases from March 2021 to August 2022.

The Bank did not provide hints about future policy moves in its communiqué, but its tone remained largely unchanged from recent meetings. It stated that risks to the inflation outlook remain in both directions. The COPOM affirmed it would monitor fiscal policy developments—now particularly uncertain under the new administration—and their effects 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. Meanwhile, virtually all of our panelists see the benchmark SELIC rate being cut in 2023.

The next monetary policy meeting is scheduled for 21–22 March.