The Central Bank of Brazil reiterated its plans to pausar the upload cycle of interest rates against inflation that remains above the objective. He also stressed that much of the impact of monetary policy is yet to come.
“The hardening cycle has been particularly fast and firm,” wrote the members of the Bank Board, headed by Gabriel Galipolo, In the minutes of their June 18 meeting, when they decided to raise the Senlic rate in a quarter to 15%.
The committee members do not hesitate to raise the fees again if necessary. “The Committee emphasizes that it will remain vigilant, that future monetary policy measures can adjust, and that it will not hesitate to continue with the cycle of increases if appropriate”indicates the document published on Tuesday.
“The main conclusion obtained and shared by all COPOM members was that, in an environment of disagreeing, as the current one,” greater monetary restriction is required for a longer period than would be adequate in other circumstances, ”they wrote.
The minutes indicate that, except for a sudden change in perspectives, the BCB will hold SELLIC at 15% for several meetingsaccording to Fabio Kanczuk, former member of the Council of the Central Bank and current director of Macroeconomía de Asa. “The Committee reaffirmed that its plan is to keep rates at a contractive level for a very long period due to the disagreement of expectations,” Kanczuk wrote.
Since September the BCB has raised the S RateELIC in 4.5 percentage points, in an attempt to stop inflation that has remained well above the 3% targetdriven by public spending and low unemployment. However, Latin America’s largest economy already shows deceleration signs: The general activity grew only 0.16% in April, and retail sales fell that month.
Those responsible for monetary policy also indicated that The local economy has shown resilience which has made efforts difficult to redirect inflation towards the goal. At the same time, there are signs of deceleration in areas such as bank credit.
“The credit has shown an inflection, with the increase of rates and a lower appetite for risk by the bidders,” they wrote.
Recent data show a gradual moderation in growth, although still limited. Council members also warned about negative global perspectives due to geopolitical and commercial tensions.
According to Rafaela Vitoria, Chief Economist of Inter, the BCB could begin to discuss features of fees in December. The main risk, he points out, would be an increase in public spending in 2026. In that case, “inflation could persist and Selic remain in 15% for a longer time,” he wrote in a note.
The 12% appreciation of the real against the dollar has partially helped the Central Bank in its fight against inflation. A stronger exchange rate helps contain import costs.
Even so, the Council provides that inflation barely drop from 5.32% to 4.9% in 2025 and 3.6% in 2026according to estimates published last week. Economists surveyed by the Central Bank project that prices will continue above the target until 2028.
The Council is also closely observing the effects of the fiscal policy of President Luiz Inacio Lula da Silva on inflation. According to the minutes, the efforts of the Ministry of Finance to reduce tax exemptions, increase income and reinforce public accounts could help bring inflation to the goal.
“The recent debate, which emphasizes the structural dimension of the budget and the gradual reduction of spending over timecould influence the perception of debt sustainability ”and the rates curve, according to the document.
