Brazil Central Bank maintains basic interest rates at 13.75% per year
Falling inflation made Brazil`s Central Bank keep interest rates steady. The Selic rate-the economy's basic interest rate-was kept at 13.75 percent a year.
In a statement, the bank said it will maintain interest rates for as long as necessary to hold down inflation, and deemed the level adequate to deal with the uncertainties surrounding the Brazilian economy. However, it did not rule out the possibility of further increases if inflation does not fall as expected.
This was the second time in a row that the Central Bank did not change the rate, which is at this level since August. Previously, the Monetary Policy Committee (Copom) had raised the Selic rate for 12 consecutive times, in a cycle that began amid rising food, energy, and fuel prices.
Inflation
The Selic rate is the Central Bank's main instrument to keep official inflation under control, as gauged by the National Broad Consumer Price Index (IPCA). In September, the index closed at 7.17 percent considering the previous 12 months. This was the third consecutive month of negative inflation, due to the fall in energy and gasoline prices.
Despite the recent deceleration, the figure is above the inflation target ceiling. For 2022, the National Monetary Council (CMN) set an inflation target of 3.5 percent, with a tolerance margin of 1.5 percentage points. The IPCA, therefore, could not exceed 5 percent this year, nor fall below 2 percent.
In the inflation report released in late September by the Central Bank, the monetary authority estimated that the IPCA would close 2022 at 5.8 percent in the baseline scenario. The projection, however, may be revised depending on the evolution of fuel prices in the final quarter of the year. The next report will be released in December.
Market forecasts are now more optimistic. According to Focus bulletin, a weekly survey about financial institutions released by the Central Bank, the official inflation should close the year at 5.6 percent. At the beginning of June, market estimates stood at 9 percent.
