Central Bank cuts 0.5 percentage point in interest rate, and Selic goes to 12.25% per year

The Monetary Policy Committee (Copom) of the Central Bank decided this Wednesday (1st) to cut the Selic rate by 0.5 percentage points, which now stands at 12.25% per year.

The cut comes in line with market expectationswhich was already betting that today’s decision would be the same as the two previous meetings, a cut of 0.5 percentage points, and in line with the statement from the last meeting that ended on September 20th.

In the statement, the BC indicated that the next meetings should have a cut of the same magnitude. “If the expected scenario is confirmed, the Committee members unanimously foresee a reduction of the same magnitude in the next meetings and assess that this is the appropriate pace to maintain the contractionary monetary policy necessary for the disinflationary process”.

The BC also highlights the importance of pursuing targets for public accounts. “Taking into account the importance of implementing the fiscal targets already established for anchoring inflation expectations and, consequently, for the conduct of monetary policy, the Committee reaffirms the importance of firmly pursuing these targets”, cites the text.

The phrase appears amid discussion, in the government, about a possible change in the fiscal target in 2024.

The Central Bank began its monetary easing cycle in decision of August 2when it reduced the basic interest rate by 0.50 percentage points, which had been at 13.75% since August 2022.

The decision at the time occurred amid great expectations from both the market and the government for the cuts to begin. Since taking office, Lula and his team – including vice-president Geraldo Alckmin and Finance Minister Fernando Haddad – have strongly criticized the level of interest rates in the country and the president of the Central Bank, Roberto Campos Neto.

The last Focus Bulletin – weekly report with projections from market analysts and economists on the country’s economic data for this and the next three years – maintained the estimates for the twelfth week in a row for 2023. The projection for the Selic remained at 11.75% at the end of this year .

For 2024, economists calculated an increase of 9.25%, compared to 9% in the previous week. Forecasts for 2025 were also raised to 8.75%, against 8.50%. The estimate for 2026 was maintained at 8.5%.

Super Wednesday

This Wednesday, the central bank of the United States, the Federal Reserve (Fed)maintained, for the second consecutive meeting, interest rates stable in the range of 5.25% to 5.50%, the highest level in 22 years, where they have been since July.

In a statement after the meeting, the Fed noted that “economic activity expanded at a strong pace in the third quarter” — a recent development that has puzzled some economists.

Despite the Fed aggressively raising interest rates 11 times since March 2022 in an attempt to combat inflation, the US economy has not only avoided a recession so far, but instead expanded at an annualized rate of 4.9% in the third quarter, mainly due to the solid indicator of consumer spending.

See also – Lula meets with Lira to unlock economic agenda

The post first appeared on www.cnnbrasil.com.br

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