Brasilia: Brazil’s central bank held its key interest rate steady at a nearly two-decade high, promising to keep it at the current level for a long time as above-target inflation expectations show only initial signs of coming down.
Policymakers led by Gabriel Galipolo kept the benchmark Selic at 15% for the second straight meeting on Wednesday, as expected by all economists in a Bloomberg survey. The board had raised rates 4.5 percentage points between last September and June.
“The committee will remain vigilant, evaluating whether maintaining the interest rate at its current level for a very prolonged period will be enough to ensure the convergence of inflation to the target,” policymakers wrote in the statement accompanying their decision.
“The committee emphasises that future monetary policy steps can be adjusted and that it will not hesitate to resume the rate hiking cycle if appropriate.”
Brazil’s annual inflation slowed for the second month in August while the bank’s main gauge of economic activity has fallen three straight times, indicating tight monetary policy is starting to have an effect.
The nation’s currency, the real, has appreciated about 5% since the last meeting, helping to tame import costs. Despite that progress, consumer price forecasts are well above the 3% target.
“The board appears to be gaining confidence in the economic slowdown, at a pace consistent with its expectations, so it sees no need to adjust its interest rate outlook at this time,” Itau chief economist Mario Mesquita wrote in a report. — Bloomberg
