Brazil Monetary Policy Left Unchanged

January 27, 2010

Brazil’s monetary policy committee, known as COPOM, left the Selic Rate at 8.75%, where such has been for the past six months.  In the previous six-month period, by contrast, five rate cuts totaling 500 basis points were implemented: 100 bps each in January, April and June, 150 bps last March and a final decrease of 50 bps in July.  In light of Brazil’s past experiences with hyper-inflation, COPOM takes inflation targeting extremely seriously.  However, with considerable slack in the economy after a significant recession, the evidence points to a continuing benign inflation scenario.  Consumer prices advanced 4.3% in the twelve months to December, down from 5.9% in the previous 12 months, and GDP in the third quarter of 2009 was still 1.3% less than a year earlier despite the return of a decent underlying pace of economic activity growth.  COPOM’s next policy meeting is scheduled for March 16-17.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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