Brazil's Monetary Policy Committee, the Copom, voted unanimously to cut the Selic reference rate by 50 basis points to 11.25% at its January 2024 meeting, extending an easing cycle that has now delivered five consecutive reductions of the same magnitude since it began in August 2023. The decision was consistent with the committee's prior guidance.
All members backed a 50 basis-point cut.
FIFTH CUT EXTENDS EASING CYCLE
The reduction to 11.25% brings the cumulative easing since August 2023 to 250 basis points, from a peak Selic rate of 13.75%. That tightening phase ran from March 2021 to August 2022, and the rate was held at its peak until August 2023.
Brazilian headline inflation had declined from the double-digit levels recorded in 2022, but the committee said inflation expectations — a key input into its deliberations — had re-anchored only partially, with the Focus survey pointing to around 3.8% for 2024 and 3.5% for 2025. The committee had flagged in previous statements that it was monitoring fiscal risks and the behaviour of longer-term inflation expectations, both of which could, if they deteriorated, prompt a reassessment of the easing trajectory.
FURTHER CUTS SIGNALLED AHEAD
Copom maintained its guidance for further 50 basis-point cuts at forthcoming meetings.
The January statement stressed that the outlook remained uncertain and required caution in the conduct of monetary policy.