Copom maintains the economy’s basic interest rate at 13.75% in the first meeting of the year

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Selic has been at this level since the beginning of August 2022; maintenance was expected by the market. The Monetary Policy Committee (Copom) of the Central Bank decided, this Wednesday (1st), to maintain the Selic rate at 13.75% per annum – a level in effect since the beginning of August 2022. The Copom usually meets every every 45 days to define the basic interest rate of the economy. This is the group’s first meeting during the government of President Luiz Inácio Lula da Silva (PT). It is also the fifth consecutive time that the Copom meets and sets the Selic at 13.75% – the result was already expected by the market. Despite maintaining the rate, the Selic remains at the highest level since November 2016, when it was at 14% per annum. That is, in just over six years. Last month, President Lula even criticized the current level of interest rates and defended lowering the inflation target as a strategy to reduce interest rates. Ana Flor talks about the Central Bank’s first meeting of the year to set the interest rate Autonomy of the BC The autonomy of the Central Bank was sanctioned by former President Jair Bolsonaro in 2021, after approval by the National Congress. Among the changes, the terms of office of the president and directors of the Central Bank became four years, which did not coincide with the four-year term of office of the President of the Republic. The idea of ​​the law is that, since the board of directors of the institution cannot be fired for eventually raising the interest rate, the action should be technical, shielded from party-political pressures, focused on combating inflation. It is up to the BC, for example, through the Monetary Policy Committee (Copom), to define the Selic rate, the economy’s basic interest rate. Inflation targets To define the level of interest, the Central Bank uses the inflation target system. When inflation is high, the Central Bank raises the Selic rate. When inflation estimates are in line with targets, the Central Bank can reduce the economy’s basic interest rate. At this moment, the BC is already adjusting the Selic rate to try to reach the inflation target for the coming years, since decisions on interest rates take between six and 18 months to have a full impact on the economy. For 2023, the inflation target was set at 3.25%, and will be considered formally met if it fluctuates between 1.75% and 4.75%. The inflation target for next year is 3% and will be considered met if it oscillates between 1.5% and 4.5%. The Central Bank failed to meet the inflation target in the last two years, when the IPCA was above the ceiling of the target system. And the expectation of the financial market is that the target will not be met again in 2023.

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