logo Agência Brasil
Economy

Brazil Central Bank keeps benchmark interest at 14.25% p.a.

The decision had been expected by analysts, who believe the rate will
Wellton Máximo reports from Agência Brasil
Published on 20/07/2016 - 19:38
Brasília
Brasília - Edifício-sede do Banco Central do Brasil (Wilson Dias/Agência Brasil)
© Wilson Dias/Agência Brasil

For the eighth consecutive time, the Central Bank (BC) refrained from changing Brazil's benchmark interest rate (SELIC). During a meeting held Wednesday (Jul. 20), the Monetary Policy Committee (COPOM) voted unanimously to maintain the SELIC rate at 14.25% per annum. The decision had been expected by analysts, who believe the rate will hold steady up to the end of the year.

COPOM's decision keeps the rate at the same percentage as October 2006.

In a note, the committee announced that the forecasts for the inflation are on the wane. The agency, however, mentions short-run risks, like the persistence in food price hikes, uncertainties regarding the approval and implementation of the necessary adjustments in the economy and the indexation of the economy, with the previous inflation feeding the future one in case price indexes remain above the target. These factors, COPOM argues, led to the preservation of the SELIC rate as it was.

Inflation

Despite the lower dollar rate, the impact of regulated prices, like water in a number of state capitals, has contributed to the maintenance of price indexes at high levels. In the upcoming months, the inflation is expected to slow down due to the deterioration of the economic crisis.

Even though rising the SELIC rate or leaving it as it is helps curb prices, a high benchmark interest rate is detrimental to the economy as elevated interest make credit difficult and drive production and consumption further down.

Changes

This is the first COPOM meeting headed by the new Central Bank President Ilan Goldfajn, and it saw a few changes being implemented. The second day of meeting had its schedule brought forward by two hours, so that the SELIC rate could be announced around 6 pm. The Central Bank decided to report the rate on the internet alone, instead of also reading it out to the press. Also, the minutes of the meeting, previously released every Thursday in the week following each meeting, will now be made public two days earlier, on Tuesday.


Translated by Fabrício Ferreira


Fonte: Brazil Central Bank keeps benchmark interest at 14.25% p.a.