Central Bank of Brazil Keeps 11% Selic Interest Rate

July 17, 2014

The 184th meeting of Copom, Brazil’s monetary policy committee, voted unanimously to leave its Selic interest rate at 11.0% and released a replica of the prior May 28th meeting statement that also decided unanimously to keep the rate steady.  These terse, 92-word communications convey very scant information particularly with regard to any future decisions.  All that’s said is that keeping the level steady seemed the right thing to do “at the moment.”  Brazil is grappling with both high inflation, which at 6.52% lies marginally above target, and weak growth that is unlikely to reach even 2% this year.  Besides the dilemma of whether to prioritize inflation or growth, making no change to the interest rate no doubt was the obvious path of least resistance just three months before a scheduled presidential election.  Also, there’s considerable monetary restraint in the pipeline that officials believe will continue to restrain inflation.  Starting the scheduled meeting in April 2013 and at every subsequent meeting through April 2, 2014, Copom authorized six rate hikes of 50 basis points each and three of 25 bps including the last one in the streak.

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



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