Central Bank of Brazil

February 7, 2018

Brazilian monetary officials lowered the Selic interest rate by a total of 625 basis points in 2017, but the reduction of 50 basis points in December had been the smallest cut. After meeting this week, members of the monetary committee, Copom, decided unanimously to halve that increment to 25 basis points and asserted that “regarding the next meeting, provided the Committee’s baseline scenario evolves as expected, at this time the Copom views the interruption of the monetary easing process as more appropriate. This view regarding the next Copom meeting might change in favor of an additional moderate monetary easing, if the Committee’s baseline scenario or balance of risks change.” The released statement explained that the economy is recovering and that the inflation scenario is evolving to a large extent as expected. CPI inflation is projected at 4.2% in 2018 and next year. “This scenario assumes a path for the policy interest rate that ends 2018 at 6.75%, and 2019 at 8.0%.” There are both upside and downside risks surrounding the baseline inflation forecast.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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