BC warns that it only accelerates the drop in interest rates with “substantial surprises”

The Central Bank Monetary Policy Committee (Copom) highlighted in the minutes of the last meeting, held on the 1st and 2nd, that an intensification of the pace of Selic rate adjustments is unlikely. With a cut of half a percentage point, the agency began, after three years, a cycle of interest reduction. The rate went from 13.75% to 13.25% per annum.

BC directors point out that adjustments greater than half a percentage point would depend on “substantial positive surprises” that would further increase confidence in the disinflationary dynamics.

“Such confidence would only come with a significant change in the fundamentals of inflation dynamics, such as a much more solid re-anchoring of inflation expectations, in particular the longer-term ones, of its inflation projections, of the output gap [a diferença entre a produção potencial e a real] and the balance of risks. The Committee maintains its firm commitment to the convergence of inflation to the target within the relevant horizon”, quotes the document, released this Tuesday morning (8).

The agency points out that the half percentage point decreases bring together, “on the one hand, the firm commitment to re-anchoring expectations and the disinflationary dynamics, and, on the other, the adjustment in the level of monetary tightening in real terms in the face of the more benign dynamics of anticipated inflation in the baseline scenario projections”.

It was also highlighted that the moment inspires caution, reinforcing the “serenity and moderation that the Committee has expressed”.

Need for reforms and predictability in public accounts

The Copom also recalled that structural reforms and the predictability of public accounts are fundamental for increasing the productivity of the economy, for potential growth and for increasing the confidence of companies, investors and families.

According to the organ, the fading in the effort of structural reforms; the increase in targeted credit (such as, for example, resources subsidized by BNDES) and uncertainties about the stabilization of the public debt have the potential to raise the neutral interest rate (the one that neither stimulates nor discourages the economy), with harmful impacts on monetary policy and, consequently, its cost to the economy.