Copom reduces Selic from 13.75% to 13.25% per year

The Monetary Policy Committee (Copom) of the Central Bank decided this Wednesday (2) to reduce the Selic rate from 13.75% to 13.25% per annum. Despite the reduction, the decision was not unanimous within the Copom.

The drop of 0.5 percentage point serves the financial market and the government. While economists from analysis houses mostly projected a more measured reduction in the Selic rate, of 0.25 percentage points, only a small portion believed that the Central Bank would maintain interest rates at 13.75% per annum.

After three years without a significant decrease, this was the first cut in the basic interest rate. The last drop had taken place in August 2020, in the midst of the most acute phase of the Covid-19 pandemic, when the Selic rate fell from 2.5% to 2% per year.

The Copom evaluated the alternative of reducing the basic interest rate to 13.50%, but considered it appropriate to adopt a pace of decrease of 0.50 percentage points at this meeting due to the improvement in the inflationary scenario. “The reduction reinforces the objective of maintaining a contractionary monetary policy for the re-anchoring of expectations and the convergence of inflation to the target in the relevant horizon”, explained the Copom.

Committee members also anticipated that there should be a reduction of the same magnitude in the next meetings and assess that “this is the appropriate pace to maintain the contractionary monetary policy necessary for the disinflationary process”

Copom members who voted for the 0.50 percentage point reduction were: Roberto de Oliveira Campos Neto (chairman), Ailton de Aquino Santos, Carolina de Assis Barros, Gabriel Muricca Galípolo and Otávio Ribeiro Damaso. Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura and Renato Dias de Brito Gomes voted for the 0.25% reduction.

Regarding inflation projections, the Copom informed, based on its reference scenario, that they are situated at 4.9% in 2023, 3.4% in 2024 and 3.0% in 2025. Inflation projections managed prices are 9.4% in 2023, 4.6% in 2024 and 3.5% in 2025.