The Monetary Policy Committee (Copom) do Banco Central decided this Wednesday (11) to accelerate the pace and raise the basic interest rate in the country by 1 percentage point, to 12.25% per year. This was the third consecutive increase in the Selic rate and surprised most experts, who pointed to an increase of 0.75 points.
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In the decision, which was unanimous, the committee also indicates that if the scenario continues to be adverse, it should maintain the rate of interest rate hikes for at least two more meetings. “Faced with a more adverse scenario for inflation convergence, the Committee foresees, if the expected scenario is confirmed, adjustments of the same magnitude in the next two meetings”, says the text.
If the two suggested increases are confirmed, the Selic will reach 14.25%, the highest level since October 2016. Remembering that this was the last meeting under the command of Roberto Campos Neto. From 2025 onwards, the new president of the Central Bank will be Gabriel Galípolo.
This is the biggest interest increase carried out by Copom since May 2022, when there was also an increase of 1 percentage point, to 13.25%. Furthermore, at this new value, the Selic reaches its highest level since December last year, when it was at 12.25% per year.
Before this meeting, the climate was already of greater concern in the market, with experts citing that the The increase in interest rates made so far is not having the expected effect: inflation remains high and, worse, expectations are increasingly negative. This is what experts call loss of effectiveness of monetary policy. In this type of situation, to achieve the same result, the dose of interest needs to be much higher.
And this scenario of out-of-control inflation is cited by the Copom itself in today’s decision: “Inflation expectations for 2024 and 2025 ascertained by the Focus survey rose significantly and are around 4.8% and 4 .6%, respectively.” And the committee’s conclusion is that “due to the materialization of risks, the scenario appears less uncertain and more adverse than at the previous meeting.”
The Central Bank also cites the recent tax packagewhich significantly affected asset prices and market expectations, mainly in relation to the risk premium, inflation and exchange rate, which impacts the current more adverse scenario.
