Central Bank of Brazil Engineers Another Rate Hike

April 3, 2014

The announcement came last Wednesday that the Central Bank of Brazil’s Selic rate is being raised to 11.0% from 10.75%.  There have been three hikes of 25 basis points and six of 50 bps over the past year from a record low of 7.25% prior to April 2013.  The striking thing about the latest move is the shortness of the explanatory statement.  Even the prior hike on February 26, whose size was halved, aroused speculation that Brazil’s tightening cycle is nearing a cresting point.  Today’s entire statement, shown below, leaves officials with plenty of flexibility to stop at 11.0% or do just one more move.

Brasília – The Copom unanimously decided, at this moment, to increase the Selic rate by 0.25 p.p., to 11.00 percent, without bias.

The Committee will monitor the evolution of the macroeconomic scenario until its next meeting, so that it then defines the next steps in its monetary policy strategy.

The following members of the Committee voted for this decision: Alexandre Antonio Tombini (Governor), Aldo Luiz Mendes, Altamir Lopes, Anthero de Moraes Meirelles, Carlos Hamilton Vasconcelos Araújo, Luiz Awazu Pereira da Silva, Luiz Edson Feltrim and Sidnei Corrêa Marques.

The April Copom Minutes will be released in Portuguese next Thursday, April 10.

The next scheduled rate announcement will be made on May 28.  Monetary tightening became imperative a year ago because of excessive inflation and selling pressure on the real.  Even now, inflation of 5.7% exceeds the target mid-point and is expected to average a shade above 6% in 2014.  The real has lately been more stable but lies about 15% below its year-ago value. 

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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