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Central Bank keeps key rate unchanged at 13.75% a year

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The Central Bank’s Monetary Policy Committee (Copom), in its first meeting since President Luiz Inácio Lula da Silva took office, kept the benchmark interest rate Selic at 13.75% per year.The decision was unanimous and in line with the median of market expectations. According to a survey of 106 institutions conducted by Valor, agents unanimously expected the Selic to remain at 13.75%.During the cycle that began in March 2021, the monetary authority raised the Selic rate by 11.75 percentage points for 12 consecutive times until August, in the face of a scenario of high and persistent inflation.According to the Copom, the relevant horizon for the monetary policy includes 2023 and, to a greater extent, 2024. In a statement, the committee said the maintenance of the Selic reflects "the uncertainty around its scenarios" and a balance of risks "with even higher than usual variance" for inflation. Besides, the Central Bank considers it "consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon.""The current scenario, particularly uncertain on the fiscal side and with inflation expectations drifting away from the inflation target on longer horizons, requires further attention when evaluating risks. The Committee judges that this scenario raises the cost of the disinflation that is needed to reach the targets established by the National Monetary Council. In this scenario, the Copom reaffirms its commitment to set monetary policy to meet the targets," says the Central Bank’s statement.With a tougher tone on fiscal risks, the Copom stated that it "remains vigilant" and that it will continue to evaluate whether the strategy of keeping the Selic rate for a "longer period than in the reference scenario" is sufficient to bring inflation to the target.The collegiate indicates that it will keep interest rates at their current level for longer than the market expected. The market bets that the cuts will begin in September.The Copom stated that the environment, "particularly uncertain on the fiscal side and with inflation expectations drifting away from the inflation target on longer horizons," demands greater attention and that it will conduct "the monetary policy to meet the targets."The...

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