On Wednesday, Brazil’s Central Bank (BCB) Monetary Policy Committee (Copom) decided to maintain the Selic rate at 10.5% annually, Agencia Brasil reported. This decision follows a pause in the rate cuts initiated last year, which had reduced the Selic from 13.75% in August 2022 to 10.25% by May 2024.
Copom attributed the decision to ongoing global uncertainties and stronger-than-anticipated domestic economic and labor market conditions. The committee emphasized that the current economic resilience and rising inflation projections necessitate cautious monitoring.
The Copom stressed that maintaining the Selic rate is crucial for continuing the disinflation process and anchoring inflation expectations around the target. Future adjustments to the rate will depend on the Central Bank’s commitment to achieving its inflation goals.
The Selic rate, the BCB’s primary tool for controlling inflation as measured by the Broad National Consumer Price Index (IPCA), is aimed at managing inflation. In June, the IPCA increased by 0.21%, a decrease from May’s 0.46% rise. Year-to-date, the IPCA has risen 2.48%, and over the past 12 months, it stands at 4.23%, up from 3.93% previously.
For 2024, the National Monetary Council (CMN) targets inflation at 3%, with a tolerance range of ±1.5 percentage points. The BCB’s June Inflation Report forecasts a 4% IPCA for 2024, while the Focus bulletin projects a 4.1% rate by year-end.
The decision received mixed reactions from various sectors. The Confederação Nacional da Indústria (CNI) expressed concern that maintaining the Selic rate could hinder economic activity and urged for rate cuts to reduce financial burdens on businesses and consumers. Conversely, the Federation of Industries of the State of Rio de Janeiro (Firjan) argued that sustainable rate cuts depend on improving public accounts, while the Federation of Commerce of Goods, Services, and Tourism of the State of São Paulo (FecomercioSP) supported the decision, suggesting that only a stronger fiscal position could warrant future cuts.
The National Confederation of Commerce (CNC) found the decision detrimental to the productive sector due to higher borrowing costs but acknowledged its importance for macroeconomic stability. Meanwhile, the Força Sindical labor union criticized the rate decision as beneficial to speculators at the expense of economic growth and job creation.
