Brazil Interest Rate

The central bank of Brazil reduced its key Selic rate by 50 bps to 10.75% in its March meeting, in line with expectations. The Committee observed the current external environment remains volatile, characterized by ongoing debates surrounding the initiation of monetary policy easing in major economies and the pace of inflation decline globally. Domestically, economic activity indicators aligned with the Copom's anticipated slowdown scenario. Although headline consumer inflation shows a disinflation trend, underlying inflation measures exceeded the target in recent releases. Copom projects 3.5% and 3.2% inflation for 2024-25. They cut the interest rate to aid convergence to target inflation and stabilize economic activity. The Committee underscores the need for fiscal targets to anchor inflation expectations and plans further reduction if the current scenario persists, aiming for prudence and moderation in monetary policy amidst global uncertainties.

The central bank of Brazil reduced its key Selic rate by 50 bps to 11.25% in its January meeting, in line with expectations. The Committee observed that economic activity indicators align with the anticipated economic slowdown. Consumer headline inflation continues on a disinflationary path, and inflation expectations for 2024 and 2025, according to the Focus survey, stand at around 3.8% and 3.5%, respectively. Committee members unanimously anticipate a similar reduction in the upcoming meetings, deeming it the appropriate pace to sustain the necessary contractionary monetary policy for the disinflationary process. The Committee underscores that the total easing cycle's magnitude over time hinges on factors such as inflationary dynamics, long-term expectations, inflation projections, the output gap, and the balance of risks.

The central bank of Brazil lowered its key Selic rate by 50 bps to 11.25% for the fourth consecutive time in its December meeting, as widely expected. The Committee noted that the set of economic activity indicators remains consistent with the economic slowdown scenario anticipated by the Copom. Consumer headline inflation, maintained a disinflation trajectory, and inflation expectations for 2023, 2024 and 2025 calculated by the Focus survey are around 4.5%, 3.9% and 3.5%, respectively. The Committee members unanimously foresee a reduction of the same magnitude in the next meetings and assess that this is the appropriate pace to maintain the contractionary monetary policy necessary for the disinflationary process. The Committee emphasizes that the total magnitude of the easing cycle over time will depend on the evolution of inflationary dynamics, inflation expectations, particularly longer-term ones, their projections of inflation, the output gap and the balance of risks.