Central Bank of Brazil Tightens for a Ninth Time

March 17, 2022

A full percentage point increase in the Central Bank of Brazil‘s Selic rate to 11.75% matched what analysts were expected. The move was agreed unanimously, and a released statement foreshadows a similarly-sized rate hike at the next policy review: “For its next meeting, the Committee foresees another adjustment of the same magnitude. The Copom emphasizes that its future policy steps could be adjusted to ensure the convergence of inflation towards its targets and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy.” Today’s rate hike was the ninth tightening in a sequence that began one year ago from a cyclical low of 2.0%. Brazilian CPI inflation has accelerated from a 21-year low of 1.9% in May 2020 through 5.2% in February 2021 to 10.5% last month. “The Committee considers that, given its inflation projections and the risk of a deanchoring of long-term expectations, it is appropriate to continue advancing in the process of monetary tightening significantly into an even more restrictive territory.” The medium-term target is 5%.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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