Central Bank reduces interest rate by 0.5% and Selic goes to 12.75%

The Central Bank’s Monetary Policy Committee (Copom) decided this Wednesday (20) to reduce the basic interest rate by half a percentage point, taking the Selic rate to 12.75% per year. This is the second consecutive drop in basic interest rates. The reduction was already expected by the financial market.

The Committee stated that if the expected scenario for the economy is confirmed, there should be a “reduction of the same magnitude in the next meetings”. Copom members “assess that this is the appropriate pace to maintain the contractionary monetary policy necessary for the disinflationary process.”

“Taking into account the importance of implementing the fiscal targets already established for anchoring inflation expectations and, consequently, for the conduct of monetary policy, the Committee reinforces the importance of firmly pursuing these targets”, said the Copom, in a note.

The BC pointed out that the reduction “is compatible with the strategy of inflation convergence around the target over the relevant horizon, which includes the year 2024 and, to a lesser extent, 2025”. “Without prejudice to its fundamental objective of ensuring price stability, this decision also implies smoothing fluctuations in the level of economic activity and promoting full employment”, he highlighted.