Copom maintains Selic at 13.75% per year after twelve consecutive increases

The Monetary Policy Committee (Copom) of the Central Bank (BC) decided to keep the Selic – the economy’s basic interest rate – at 13.75% this Wednesday (21). The decision was widely expected by the market.

In a statement, the Copom points out that, despite the maintenance, a new high is not ruled out if “the disinflation process does not proceed as expected.” “The Committee will remain vigilant, assessing whether the strategy of maintaining the basic interest rate for a sufficiently long period will be able to ensure the convergence of inflation. The Committee reinforces that it will persevere until not only the disinflation process is consolidated, but also the anchoring of expectations around its goals. The Committee emphasizes that future monetary policy steps may be adjusted and will not hesitate to resume the adjustment cycle if necessary.”

The maintenance decision was not unanimous. Two Committee members voted for a 0.25 percentage point increase.

The move announced this Wednesday (21) marks the end of the biggest cycle of monetary tightening in Brazil since 1999, when the inflation targeting system began. The BC started raising the Selic in March 2021, when the economy’s basic interest rate was at 2%.

The current level is the highest since November 2016, when the base rate was 14% per year.

In the statement from the previous meeting, the committee had already signaled the end of the bullish cycle, but left open the possibility of a residual adjustment of 0.25 percentage point.

The BC decision comes amidst inflation expectations that are still far from the target, although the latest market estimates show constant reductions, linked, above all, to the reduction of taxes on fuel and energy and the successive recent drops in the prices of Petrobras inputs sold to distributors.

In the latest Focus Bulletin, which brings together the calculations of analysts and financial institutions, the estimates for this year’s IPCA dropped to 6%, from 6.40% a week ago. For next year, analysts see an IPCA of 5.01%, compared to 5.17% estimated a week ago.

The target pursued by the BC is 3.50% for this year, 3.25% for 2023 and 3% for 2024, all with a margin of 1.5 points up and down.