Central Bank of Brazil Lifts Selic Rate Further
August 29, 2013
In a nearly universally expected move, Brazil’s monetary policy committee, Copom, increased the Selic interest rate to 9.0% from 8.5%. The cumulative move over the past four months has been an advance of 175 basis points through increments of 25 bps in April and 50 bps each in May, July and now August.
A released statement indicates that the decision was, as in July, made unanimously. The action furthers the adjusted process required to depress inflation and make sure that lower inflation persists in the coming year. Compared to an inflation target of 2.5-6.5%, consumer prices had increased 6.3% in the year to July and appears likely to rise higher in the nearest term because of a depreciating exchange rate. The real, like other emerging market currencies associated with current account deficits, has been depressed this year and investors prepare for less quantitative stimulus from the Federal Reserve. The real is some 13.5% weaker against the dollar than its opening value of 2013, and Brazil’s current account shortfall equals roughly 3.2% of GDP. The statement from officials does not indicate a policy bias, but neither did the statement after the prior rate hike. Minutes of this month’s meeting will be published September 5, and the next two scheduled policy decisions will be made on October 19 and November 27.
Copyright 2013, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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