To no one’s surprise, the Brazilian Central Bank has kept the country’s benchmark interest rate unchanged at 13.75 percent. And it told markets that its restrictive monetary policy will remain for the foreseeable future.
“Considering the uncertainty [around the economy], the [Monetary Policy] Committee remains vigilant, assessing whether the strategy of maintaining the basic interest rate for an extended period will be able to ensure the convergence of inflation,” the bank said in a statement.
Hours before the policy decision was announced, the U.S. Federal Reserve lifted rates to a 16-year high — but signaled a possible pause in hikes over the coming months.
As in previous statements, Brazil’s Central Bank reaffirmed its commitment to taming inflation at all costs. “[The] disinflation process tends to be slower in an environment of unanchored inflation expectations, [demanding] greater attention in the conduct of monetary policy,” the bank’s statement reads.
While easing, inflation remains high in Brazil — at 4.65 percent in the 12 months to March — and widespread. Moreover, expectations for future inflation have consistently deteriorated. Market agents surveyed weekly by the monetary authority have raised their year-end inflation forecast from 5.03 percent at the turn of the year to 6.05 percent now.
Recent moves by the Luiz Inácio Lula da Silva administration to raise the minimum wage and the income tax threshold have further added pressure on public accounts and fueled pessimism about the economy.
As predicted by several analysts, the monetary policy committee emphasized its goal of bringing the inflation rate within the government’s 1.75-4.75-percent...
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