Benchmark interest rate kept at 14.25% per annum
The Central Bank (BC) has decided to maintain Brazil's bank rate (SELIC) at its existing level for the fourth consecutive time. By six votes to two, the Monetary Policy Committee (COPOM) kept the SELIC rate unchanged at 14.25% per annum at its meeting held Wednesday (Jan. 20). The decision came as a surprise to financial analysts who expected an increase of 0.5 percentage points.
The decision to maintain the current rate was backed by Central Bank Governor Alexandre Tombini and five directors, whereas two directors voted for a 0.5 percentage point increase. In a statement, the committee cited not only inflation, but also the country's current balance of risks, domestic and especially external uncertainties as the factors they weighed into their decision.
Since late July, the benchmark interest rate has been stable at the level it was in October 2006. SELIC is the Central Bank's main instrument to control official inflation as measured by the Broad National Consumer Price Index (IPCA).
The National Monetary Council has set a target of 4.5% plus or minus two percentage points for the year's inflation (within a maximum 6.5%). According to the Brazilian Institute of Geography and Statistics (IBGE), it closed out 2015 at 10.67%, the highest rate since 2002.
In the latest Inflation Report released in December, the bank forecast the IPCA will close out 2016 at 6.2%. Market analysts are more pessimistic, predicting 7% in the Central Bank's market readout. This year, the dollar hike will continue to create inflationary pressures pushing up the price of imported goods and raw materials.
Translated by Mayra Borges
Fonte: Benchmark interest rate kept at 14.25% per annum
