The Central Bank published a longer than usual minutes to justify the increase in the Selic rate; The Copom highlighted fiscal risks, economic uncertainties and external imbalances as the main factors

The publication of the minutes of the Monetary Policy Committee (Copom) meeting has attracted more attention since President Luiz Inácio Lula da Silva began to criticize the head of the Central Bank, Roberto Campos Neto. 

Therefore, the directors of central bank decided to write nine more paragraphs in the minutes released this Tuesday morning (7). The document details how the decision on the basic interest rate (Selic) was taken and contains clues about what to expect from now on. 

In all, there were 32 paragraphs, against 23 in the last Copom minutes. The text includes information on scenarios and risk analysis, as well as a discussion on the conduct of monetary policy.

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What the Copom said in the minutes

O central bank (BC), which since 2021 has formal autonomy, reaffirmed in the minutes of the Monetary Policy Committee (Copom) its commitment to the goals established by the National Monetary Council (CMN). This attitude reinforces the BC's commitment to seeking price stability in the country.

The Central Bank (BC) decided to maintain the basic interest rate, the Selic, for the fourth consecutive month, announcing that fiscal uncertainty and the departure of inflation expectations from the target in longer terms have a significant cost for control inflation. The Monetary Policy Committee (Copom) also recognized that the fiscal package recently announced by the new government may attenuate fiscal stimuli on demand and, consequently, reduce the risk of high inflation.

Economy will cool down

According to the Central Bank, recent data indicate a slowdown in the pace of growth in Brazilian economy and that this performance should intensify in the coming quarters. 

In addition, directors found that there was some partial recomposition of real wages, but that this was accompanied by a deceleration in nominal earnings, which will be more evident ahead. The policy of maintaining high interest rates was also mentioned, as it could have important effects on the economy.

The Committee of central bank closely monitor developments in the labor market, constantly assessing the impact of lagged inflation and pressures in the labor market on wage readjustments. 

Therefore, the Central Bank hopes that this slowdown can cool down inflationary pressures. Committee members stressed that it is necessary for the slowdown to continue, so that monetary policy channels take effect and inflation returns to its targets. The BC recognizes the restrictive nature of the Selic rate for economic growth, but understands that it is necessary to control high inflation outside the target.

Source: Estadão Contents