Central Bank of Brazil

May 29, 2014

As widely expected, Brazil’s monetary policy committee, Copom, paused its tightening streak.  After nine straight previous meetings spanning the year between April 2013 and April 2, 2014, the Selic interest rate had been raised each time and by a total of 375 basis points from a record low of 7.25% to 11.0%.  This month, there was no increase, but Copom officials left future policy indeterminate by characterizing this month’s 8-0 vote as being the decision “at this moment” and attaching a neutral bias to policy going forward.  As was the case after the 25-basis point hike in April, today’s released statement was very brief and revealed that the vote had been unanimous.  Future actions will be data-driven and hinge on macroeconomic trends and inflation prospects.  Brazilian inflation of 6.3% currently exceeds target and is not seen likely to fall much in the next couple of months.  Real GDP grew just 1.9% between end-2012 and end-2013, and the jobless rate is at 5%.  The next policy announcement is set for July 16, and minutes of the meeting just held will be released a week from today.

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



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