Central Bank of Brazil Extends Declining Rate Cycle

March 21, 2018

The Brazilian Selic rate was reduced by an additional 25 basis points to 6.50%, extending its cumulative drop to 775 basis points during the last year and a half. Inflation is below 3% and the target midpoint of 4.5%. The monetary policy committee, Copom, released a statement expressing satisfaction with Brazil’s recovery, the global environment, and the outlook for inflation. There are risks to the forecast, but they are balanced. Forward guidance points to another cut at the next meeting but a pause thereafter:

Regarding the next meeting, at this time the Copom views an additional moderate monetary easing as appropriate. The Committee judges that this additional stimulus mitigates the risk of delayed convergence of inflation toward the targets. This view regarding the next Copom meeting might change in favor of the interruption of the monetary easing process, if risk mitigation proves unnecessary. Beyond the next meeting, absent relevant additional changes to the baseline scenario and balance of risks, the Copom deems appropriate to interrupt the monetary easing process, with the aim of evaluating next steps.

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



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