The Monetary Policy Committee (Copom) of the Central Bank (BC) announced, this Wednesday (15), a 0.5 percentage point hike in the basic interest rate. Thus, the Selic rate increases from 12.75% per annum (pa) to 13.25% per annum.
This was the 11th consecutive advance of the Selic, which remained at the lowest historical level of 2% pa between August 2020 and March last year. It is the highest level of the rate since November 2016.
As expected, the Copom reduced the slightest tightening of monetary policy by opting for a hike in the Selic rate at a lower level than the 1 percentage point observed in the last meetings since March 2021, when a cycle of hikes in the rate began to combat inflation in the country, which closed at 10.06% last year. In the period, the inflation target of 3.75% – which could reach 5.25% – was not met.
Projections for this year’s inflation are already 8.89%, also above the center and ceiling of the target, equivalent, respectively, to 3.5% and 5%. Considering that monetary policy decisions take between six and 18 months to have an impact on economic activity, Copom is already focusing its efforts on ensuring compliance with the 2023 target and no later than this year. Next year, the center of the target is set at 3.25% per year, with a tolerance of 1.5 percentage points up or down. Market forecasts are that inflation will reach 4.39% next year.
The basic interest rate is the Central Bank’s main instrument to pursue the inflation target established by the National Monetary Council (CMN). A higher interest rate, however, could delay or hamper the recovery of economic activity.
According to the latest edition of the Focus Bulletin, released last week, the expectation is for a Selic rate of 13.25% per year until the end of this year, falling to 9.75% per year next year.
Source: CNN Brasil
