Brazil: Central Bank stays put in July
At its meeting on 30–31 July, the Monetary Policy Committee (COPOM) of the Central Bank of Brazil (BCB) decided to maintain the SELIC rate at 10.50%. The hold, which mirrored June’s decision, was unanimous and had been priced in by markets.
The decision to stand pat was driven by a deterioration in the inflation outlook. The BCB raised its baseline scenario inflation forecasts for both 2024 and 2025 by 0.2 percentage points, to 4.2% and 3.6%, respectively. Accordingly, both metrics moved closer to the upper bound of the Central Bank’s 1.5–4.5% tolerance band. As a result, the Bank deemed a tighter-for-longer monetary policy stance necessary to anchor both inflation and inflation expectations to the 3.0% center-point of this range. Moreover, the Bank noted that economic activity had proven more resilient than anticipated.
The Central Bank provided no explicit forward guidance, but it stated that monetary policy would remain contractionary for sufficient time to consolidate disinflation and anchor inflation expectations around the target. The vast majority of our panelists now expect the SELIC rate to end 2024 at its current level; the rest still see room for further easing. The Committee will reconvene on 17–18 September.