The Monetary Policy Committee of the Central Bank – Copom – unanimously decided to reduce the Selic rate to 12.25% per annum The Monetary Policy Committee of the Central Bank – Copom – unanimously decided to reduce the Selic rate to 12.25% per annum, with a neutral bias.
The Copom update can be described with the following observations on the basic scenario:
All activity indicators released since the last meeting of the Copom show some mixed signals, but consistent with the stabilization of the economy in the short term. The evidence suggests a gradual recovery of economic activity throughout 2017;
Externally, the scene is still quite uncertain. However, to date, the strongest global economic activity and the consequent positive impact on commodity prices have mitigated the effects on the Brazilian economy of the economic policy reviews in some developed economies;
The behavior of inflation remains favorable. The process of disinflation is more widespread and indicates the disinflation in the components more sensitive to the economic cycle and the monetary policy. There was also a resumption in the disinflation of food prices, which is the favorable shock of supply;
The inflation expectations calculated by the Focus survey fell to around 4.4% for 2017 and remained around 4.5% by 2018 and further horizons; Y
In the market scenario, the Copom projections reduced to around 4.2% in 2017 and remained around 4.5% by 2018. This construction of scenarios in the case of the trajectory of the interest rate Which reaches 9.5% and 9% by the end of 2017 and 2018, respectively.
The Committee notes that its baseline scenario for inflation implies risk factors in both directions: (i) the high degree of uncertainty in the external environment may hinder the process of disinflation; (Ii) the favorable supply impact of food prices can produce side effects and thus contribute to the further decline in inflation expectations and inflation in other sectors of the economy; And (iii) the recovery of the economy may be more (or less) long and gradual than expected.
The Committee emphasizes the importance of adopting and applying reforms, especially the tax, and adjustments in the Brazilian economy to the sustainability of disinflation and the reduction of its structural interest rate.
Taking into account the basic scenario, the risk balance and the wide range of information available, the Committee unanimously decided by reducing the basic interest rate of 12.25% per annum without prejudice. The Committee considers that the convergence of inflation to the target of 4.5% in the relevant time horizon for monetary policy, which includes the calendar years 2017 and the gradual increase of the 2018 peso, is compatible with the process of monetary easing .
The Copom understands that the extension of the cycle of monetary easing will depend on the structural interest rate estimates of the Brazilian economy, which will continue to be reassessed over time.
The Copom emphasizes that a possible intensification of the pace of monetary expansion will depend on the estimation of the duration of the cycle, but also the evolution of the economic activity of other risk factors and the projections and expectations of inflation.
The following members of the Committee voted in favor of this decision: Ilan Goldfjan (President), Anthero de Moraes Meirelles, Carlos Carvalho Viana, Isaac Sidney Menezes Ferreira, Luiz Edson Feltrim, Otávio Ribeiro Dámaso, Reinaldo Le Grazie, Sidnei Corrêa Marques and Tiago Couto Berriel.