Brazil's Copom Holds Selic Rate at 10.50%, Ending Easing Cycle

Brazil's Monetary Policy Committee, known as Copom, voted unanimously on 19 June 2024 to hold the Selic benchmark interest rate at 10.50%, bringing a halt to an easing cycle that had been running since August 2023. The decision was published on the Banco Central do Brasil's website.

In the statement accompanying the decision, Copom cited a deterioration in inflation expectations as a primary driver of the hold, alongside an uncertain global backdrop and resilient domestic activity, which the committee said demanded greater caution; it added that it was closely monitoring how recent fiscal developments affect monetary policy.

INFLATION EXPECTATIONS DRIVE CAUTION

The easing cycle that Copom brought to a close had seen the Selic rate reduced from a peak of 13.75%.

Inflation expectations, as reflected in market surveys and central bank surveys of professional forecasters, had drifted higher in the weeks leading up to the June meeting.

The committee reiterated that a credible fiscal policy committed to debt sustainability helps anchor inflation expectations.

EASING CYCLE CLOSES AFTER TEN MONTHS

The Banco Central do Brasil had cut rates at successive meetings during the cycle.

The committee did not indicate a tightening bias in its statement, but neither did it offer any commitment to resuming cuts in the near term.

The Banco Central do Brasil operates under an inflation-targeting framework. The committee said it would remain vigilant and that any future adjustments to the Selic would be dictated by its firm commitment to bringing inflation back to target.