Bank of Brazil Elects Not to Hike 14.25% Selic Interest Rate Further

September 2, 2015

For seven straight meetings of Copom, the policy committee, between October 2014 and July 2015, the Selic Rate had been increased, bringing such up 325 basis points in all to 14.25% in order to counter accelerating inflation, which now stands exceeds 9.5% and the 3-5% target.  Monetary policy hasn’t had much cooperation from fiscal policy.  The economy is mired in recession and expected to contract almost 2% this year.  The real has been about the weakest currency in the world, and the political situation has become more unstable.  One wonders how Rio can host next year’s Olympics.  Today’s decision not to raise the Selic rate further was generally expected and marks a determination that the risks of tightening monetary policy now appear even greater than the the danger of not doing so, which is admittedly high in a country with a history of several bouts of hyper-inflation in the past.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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