Central Bank of Brazil Leaves Selic Rate at 14.25%

August 31, 2016

The Selic Rate has been 14.25% since a 50-basis point hike in July 2015 culminated 325 basis points between July 2014 and July 2015. The decision was unanimous by Copom, Brazil’s monetary policymaking committee. A released statement says,

Taking into account the baseline scenario, the current balance of risks, and the wide array of available information, the Copom decided to maintain the Selic rate at 14.25 percent per year, without bias. The Committee judges that a loosening of monetary conditions will depend on factors that allow greater confidence on meeting the inflation targets at the relevant horizons for the conduct of monetary policy, in particular the 4.5% target for 2017.

Today’s decision will be remembered historically as being handed down on the day the Brazilian Senate voted to affirm former President Rousseff’s impeachment. Regarding inflation, which spiked as the real plunged, the statement notes that “Current inflation remains under pressure, partly due to food components. Disinflation has evolved more slowly than expected.¬†Inflation expectations collected by the Focus survey for 2017 fell since the last Copom meeting, but remain above the 4.5% inflation target. At longer horizons, expectations have dropped to around that level.” Following a deep and prolonged recession, officials hope that the economy may be stabilizing now.

Copyright 2016, Larry Greenberg.  All rights reserved. No secondary distribution without express permission.

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