The Monetary Policy Committee (Copom) of the Central Bank predicts a higher Selic than the forecasts of financial agents, as well as for a longer period. The effort is to bring the inflation expectation for 2023 – projected at 4% by the financial market – to the center of the target, of 3.25%.
The information was disclosed this Tuesday (21) in the minutes of the 247th Copom meeting, when it was decided to raise the basic interest rate to 13.25% per year.
“The strategy required to bring projected inflation at 4.0% to around the target in the relevant horizon combines, on the one hand, a terminal interest rate above that used in the reference scenario and, on the other hand, maintaining the interest rate at significantly contractionary territory for a longer period than that used in the baseline scenario”, says the document.
The reference scenario used during the meeting extracts the projections from the Focus survey and assumes an interest rate path that ends 2022 at 13.25% pa, reduces to 10.0% in 2023 and 7.50% in 2024.
To justify the latest increase in the Selic rate, the Committee explains that “only the prospect of maintaining the basic interest rate for a sufficiently long period would not ensure, at this moment, the convergence of inflation to around the target in the relevant horizon”. The next adjustment, as already informed by the BC, must be of equal (0.5 percentage point) or lesser magnitude.
economic slowdown
Also in the Minutes, the Copom highlights that, despite the current monetary tightening cycle having been “intense and timely”, much of the expected contractionary effect is still not felt on the economy due to lags in monetary policy. The same is true for the impact on current inflation.
Thus, the Committee assesses that activity will decelerate in the coming quarters, starting in the second half of 2022, when the lagged impacts of monetary policy become more present.
“The recent data on domestic activity, which prompted a positive review for growth in 2022, still mostly reflect the process of normalization of the economy after the pandemic, both in the greater consumption of services and in the use of excess savings observed in relation to historical precedent, and the transitory fiscal stimulus carried out in the first half of the year”, he points out.
Source: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
