Copom keeps Selic at 13.75% and estimates that this moment requires “patience” on monetary policy | Economy
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The Monetary Policy Committee (Copom) of the Central Bank decided, on Wednesday (03), to maintain the interest rate at 13.75% annually – a level in effect since the beginning of August 2022.
The decision was taken in the midst of continued criticism by President Luiz Inacio Lula da Silva (Workers’ Party) and government ministers over the current level of interest rates (See more below).
Patience and serenity
In the statement issued after the meeting, the committee considered that the moment requires “patience and serenity in conducting monetary policy.”
The committee also notes that it may “resume the adjustment cycle if the de-inflation process does not proceed as expected”. In other words, he would be able to increase Selic’s rate again at another time, if needed. However, this time, Copom herself recognizes, unlike the previous announcement, that this is a “less likely scenario.”. (see previous version)
“The Committee appreciates that the situation requires patience and serenity in the management of monetary policy. Copom stresses that, although it is a less likely scenario, he will not hesitate to resume the adjustment cycle if the de-inflation process does not go as expected,” he says. Statement.
In the statement, Copom also did not provide indications of a potential rate cut at future meetings.
Copom usually meets every 45 days to set the economy’s base interest rate. This is the third meeting of the group during Lula’s government. The next event is scheduled for June 20-21.
Cobum statement
- In the external scenario, the environment is still adverse due to recent events involving banks. Cobbum adds that inflation remains “resilient” abroad and that “the central banks of the major economies remain determined to promote inflation convergence with their targets”;
- In the internal scenario, Copom considers that the economic slowdown environment is persistent and consumer inflation remains above the range consistent with achieving the inflation target.
Cilic Level Criticism
Lula’s government put pressure on the central bank to lower interest rates. The assessment is that the current Selic level hinders economic growth.
Since 2021, the central bank has operational autonomy to set monetary policy with the aim of controlling inflation.
The base interest rate
Selic is the economy’s base interest rate. It is the main monetary policy tool used by the central bank to control inflation.
It affects all interest rates in the country, such as interest rates on loans, financing, and financial investments.
When inflation rises, the central bank raises the interest rate. When inflation estimates are in line with the inflation target, BC can reduce the Selic rate;
For 2023, the inflation target is set at 3.25%, and it will be considered officially met if it fluctuates between 1.75% and 4.75%. The inflation target for next year is 3% and will be considered met if it swings between 1.5% and 4.5%.
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