Brasília – The Brazilian Central Bank’s Monetary Policy Committee (Copom) may increase its benchmark interest rate cuts. The new strategy is hinted at in the minutes to the latest Copom meeting, which were released this Thursday (2).
On February 22, Copom announced the fourth consecutive rate cut. It unanimously slashed the benchmark rate by 0.75 percentage point, from 13% to 12.25% per annum.
Considering ongoing recession and an expected drop in inflation, the committee indicates that upcoming cuts could be wider than the 0.75 percentage point one from the last meeting. “With inflation expectations anchored, inflation projections within the target range for 2018 and slightly below the target for 2017, and the high level of economic idleness, Copom’s basic scenario calls for a cycle of monetary policy distension to happen sooner,” the minute reads.
The Copom’s 2017 inflation forecast has eased compared with the estimate from January, to around 4.2%, below the 4.5% midpoint of the target range. The forecast for next year is approximately 4.5%. Financial institutions polled by the Central Bank believe inflation will be 4.36% in 2017 and 4.5% in 2018.
*Translated by Gabriel Pomerancblum
