Unanimously, Copom reduces Selic rate from 11.75% to 11.25% per year

This Wednesday (31), the Monetary Policy Committee (Copom) of the Central Bank (BC) of Brazil unanimously decided to cut the Selic rate again by 0.50%. With the decision, the basic interest rate increases from 11.75% to 11.25% per year. The cut represents the fifth consecutive reduction in the Selic, which reaches its lowest level since March 2022, when it was at 10.75% per year.

According to the BC, the decision “is compatible with the strategy of inflation convergence around the target over the relevant horizon, which includes the year 2024 and, to a greater extent, 2025”.

“The external environment remains volatile, marked by the debate on the beginning of the easing of monetary policy in the main economies and by signs of falling core inflation, which still remains at high levels in several countries. The central banks of the main economies remain determined to promote the convergence of inflation rates towards their targets in an environment marked by pressures on labor markets. The Committee assesses that the scenario continues to require caution on the part of emerging countries […] 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 reaffirms the importance of firmly pursuing these targets”, says an excerpt from the statement from the Central Bank .

The BC also reported that, as expected, consumer headline inflation – which is the generalized increase in prices of goods and services – maintained a disinflation trajectory, and the same should occur with underlying inflation – a measure that seeks to capture the trend prices, disregarding disturbances resulting from temporary shocks.

“Inflation expectations for 2024 and 2025 calculated by the Focus survey are around 3.8% and 3.5%, respectively. Copom’s inflation projections in its reference scenario are at 3.5% in 2024 and 3.2% in 2025. Projections for administered price inflation are 4.2% in 2024 and 3.8% in 2025”, said the BC.