Latest news with #Copom
Reuters
5 days ago
- Business
- Reuters
Brazil inflation hits 5.3%, central bank set to hold rates next week
SAO PAULO, July 25 (Reuters) - Brazil's inflation remained well above the central bank's target range in its mid-July reading, official data showed on Friday, as policymakers gather next week for a meeting at which they are widely expected to hold interest rates at a two-decade high. Inflation in Latin America's largest economy hit 5.30% in the 12 months through mid-July, statistics agency IBGE said, up from 5.27% a month earlier and slightly above the 5.26% expected by economists in a Reuters poll. Brazil's central bank targets inflation at 3%, plus or minus 1.5 percentage points, and policymakers have pledged to bring it back to that level. The bank delivered 450 basis points in interest rate hikes between September and June, taking the benchmark Selic rate to 15%, the highest since July 2006. It signaled last month a "very prolonged" pause to assess the effects of the hikes. "The mid-month inflation figures give policymakers no reason to consider raising rates again," said Capital Economics' emerging markets economist Kimberley Sperrfechter, who expects conditions to allow for rate cuts around the turn of the year. The central bank's rate-setting committee, known as Copom, is scheduled to meet on July 29 and 30. In the month to mid-July alone, consumer prices as measured by the IPCA-15 index rose 0.33%, up from 0.26% in the previous month. The index had been expected to rise 0.30%, according to the median forecast in a Reuters poll. The monthly increase was driven by higher housing costs as electricity prices climbed, IBGE said, as well as higher transport prices, with airfares jumping. Closely watched food and beverage prices, however, dropped for the second straight month. "Today's result will not influence Copom's decision," Inter senior economist Andre Valerio said. "It should keep interest rates unchanged, reaffirm its commitment to meeting the inflation target, and offer no indication of when it might begin a rate-cutting cycle."
Reuters
24-06-2025
- Business
- Reuters
Brazil central bank says tightening effects yet to be felt, signals pause in rate hikes
BRASILIA, June 24 (Reuters) - Brazil's central bank said on Tuesday that much of the impact from its "particularly quick and very firm" tightening cycle is yet to be felt, which is why it now foresees a pause in interest rate increases to assess those effects. In the minutes of last week's decision, when the monetary policy committee Copom raised rates by 25 basis points to 15% and signaled a "very prolonged" pause ahead, the central bank also stressed that it will still assess whether the current rate is appropriate to bring inflation back to target. Reiterating that it will not hesitate to resume hikes if needed, the central bank sought to stress that the pause does not necessarily mark the end of the tightening cycle, a message likely aimed at discouraging premature bets on when it might start easing borrowing costs. Since September, Brazil's benchmark Selic interest rate has climbed by 450 basis points. But despite the aggressive tightening, Latin America's largest economy has continued to outperform expectations, supported by resilient economic activity and a tight labor market, with annual inflation running well above the 3% target. "How do you stop raising interest rates in a scenario like this? By trusting the lags of monetary policy. ... So now it's time to wait for it to take effect," said Luis Otavio Leal, partner and chief economist at G5 Partners, who expects an initial rate cut early next year. Policymakers said in the minutes that the most recent data indicate that the economy continues to lose steam, albeit rather gradually. The central bank noted that indicators for trade, services and industry point to more moderate growth, while confidence indicators remain subdued despite some recent improvement. Given the usual lags in monetary policy transmission, these effects are expected to intensify in the coming quarters. "The committee foresees an interruption of the rate hiking cycle to examine its yet-to-be-seen cumulative impacts, and then evaluate whether the current interest rate level, assuming it (is) stable for a very prolonged period, will be enough to ensure the convergence of inflation to the target," the policymakers wrote. They stressed that the short-term inflation outlook remains adverse, although recent readings have surprised to the downside compared with analysts' expectations. The central bank also voiced broad discomfort with inflation expectations, which remain above the official target across all horizons, even after some recent decline in shorter-term projections. "Once the appropriate interest rate is determined, it should remain at a significantly contractionary level for a very prolonged period due to deanchored expectations," it emphasized. Caio Megale, chief economist at XP, said the bar is likely high for increasing rates, with the minutes focused on preventing market participants from expecting rate cuts.
Reuters
18-06-2025
- Business
- Reuters
Brazil central bank raises rates by 25 bps in seventh straight hike
BRASILIA, June 18 (Reuters) - Brazil's central bank raised interest rates by 25 basis points on Wednesday, delivering a seventh consecutive hike that defied bets it would hold rates steady, as unanchored inflation expectations and a resilient economy kept policymakers on alert. The bank's rate-setting committee, Copom, unanimously decided to lift the benchmark Selic rate to 15%, the highest since July 2006. A majority of 27 out of 39 economists polled by Reuters had expected the bank to hold rates steady at 14.75%.
Reuters
13-06-2025
- Business
- Reuters
Brazil central bank to hold interest rates at 14.75% on June 18, economists say: Reuters poll
BUENOS AIRES, June 13 (Reuters) - Brazil's central bank is expected to keep its benchmark rate unchanged at 14.75%, its highest in nearly two decades, on June 18 and also remain data-dependent for upcoming decisions, a Reuters poll of economists showed. The consensus view shifted from a poll in May, when a majority of analysts who answered extra questions on the next move by Banco Central do Brasil (BCB) said they expected a 25 basis point hike in June. It would be the first pause after the BCB raised its Selic rate six consecutive times by a total of 425 basis points to its highest since July 2006. At the end of next week's two-day meeting, policymakers will also probably reiterate their concerns about still-elevated inflation, while noting some moderation in consumer prices amid heightened uncertainty. The decision should maintain the considerable spread of more than 10 percentage points over U.S. rates, a gap that has helped strengthen Brazil's currency but is weighing on economic growth. The bank's monetary policy committee, known as Copom, will hold the Selic rate steady, according to a majority of 27 economists of 39 polled June 9-12. Twelve predicted a 25 basis-point increase to 15.00%. "Copom is expected to keep the Selic stable at 14.75% at this meeting, but with a very cautious tone, possibly leaving the doors open to raising rates again in the future," said Robson Pereira, chief economist at Brasilprev. "The statement should acknowledge that since the last meeting, there has been a reduction in the risks of an imminent global recession but also that the level of uncertainty remains very high." Brazil's inflation rate slowed more than forecast last month. However, the 12-month gauge came in at 5.32%, surpassing again the central bank's target of 3% plus/minus a margin of 1.5 percentage points. Last week, Gabriel Galipolo, BCB's governor, said the bank was keeping its options open into June's policy meeting, in line with its decision in May to drop any forward guidance on policy. Asked in the latest survey what the next move would be, all 29 respondents to the extra question called for a rate cut. Ten expected an easing in January 2026, six in December 2025 and the rest in other months. In response to another extra question on the size of the possible reduction in the cost of borrowing, a slight majority of 16 predicted a 25 basis-points cut and the other 13 a half-percentage point move. The Selic will stay at 14.75% until year-end, and then fall to 14.00% in the first quarter of 2026, closing next year at 12.00%, medians in the poll showed. (Other stories from the Reuters global economic poll)
CNBC
07-05-2025
- Business
- CNBC
Brazil central bank hikes rates to near 20-year high, leaves next steps open
The Central Bank of Brazil headquarters in Brasilia, Brazil, on Thursday, Jan. 2, 2025. Brazil's central bank raised interest rates by 50 basis points Wednesday in a sixth straight hike that pushed borrowing costs to their highest in nearly 20 years, and left future steps open amid global uncertainties and sticky domestic inflation. The bank's monetary policy committee, known as Copom, raised the Selic to 14.75% in a unanimous decision, matching forecasts from 32 of 35 economists in a Reuters poll. Policymakers stressed that the current environment calls for a "significantly contractionary monetary policy for a prolonged period" to bring inflation to target, dropping previous language about the need for "a more contractionary" stance. "For the next meeting, the scenario of heightened uncertainty, combined with the advanced stage of the current monetary policy cycle and its cumulative impacts yet to be observed, requires additional caution in the monetary policy action and flexibility to incorporate data that impact the inflation outlook," they added in the decision's statement. Flavio Serrano, chief economist at BMG Bank, said the central bank left the door open for a smaller rate hike in June if needed, though he sees it as unlikely. "My base case is zero increase in June, holding at 14.75%. There may be room for a cut at the very end of the year, depending on how the outlook evolves," he said. In March, the central bank had already flagged the need for further tightening this month, though at a slower pace than the previous three 100 basis-point hikes. With Wednesday's move - announced just hours after the U.S. Federal Reserve held rates steady but cited the risk of rising inflation and unemployment - the Selic benchmark rate has now reached its highest level since August 2006. The sky-high rates come against a backdrop of a 5.49% annual inflation rate, well above the official 3% goal, with markets skeptical that inflation will return to target even by as far out as 2028. The aggressive tightening has added 425 basis points to the benchmark rate since September, but policymakers stressed on Wednesday they observe "an incipient moderation in growth," with indicators of domestic economic activity and the labor market still exhibiting strength. GLOBAL UNCERTAINTIES Now, however, the inflation risk balance is no longer described as tilted to the upside, but rather as featuring higher-than-usual risks on both sides - including a new disinflationary risk tied to falling commodity prices. "Indeed, the external scenario points to a greater disinflationary outlook than previously expected, which could support a pause in monetary tightening as early as June," said Rafaela Vitoria, chief economist at lender Inter. Global uncertainties, triggered by sweeping U.S. trade tariffs that have clouded the outlook for the world's largest economy, have led Copom members to emphasize the need for greater caution and flexibility in remarks ahead of the decision. The current environment, they previously argued, not only limits their ability to provide any guidance but also requires policymakers to consider a broader and diverse set of data to assess whether monetary policy is achieving its intended effects. Their concern about the trajectory of Latin America's largest economy came despite some favorable inflationary developments since the Brazilian central bank's latest policy meeting, including a stronger currency BRBY and lower commodity prices. On the other hand, the government of President Luiz Inacio Lula da Silva has unveiled new stimulus measures, such as changes to rules governing payroll-deductible loans, as it struggles to reverse a plunge in the leftist leader's approval ratings. Considering changes in macroeconomic conditions, Brazil's central bank on Wednesday lowered its 2025 inflation forecast to 4.8%, down from 5.1% projected in March. For the fourth quarter of 2026, the period most influenced by current monetary policy decisions, the bank now projects the 12-month inflation rate to reach 3.6%, down from 3.7% estimated in the quarterly monetary policy report released late March.
