COPOM Leaves Rates Steady

The Brazilian central bank left its SELIC rate unchanged at 2.00% at today's decision, matching broader expectations, in what was a unanimous decision.

• The bank sees CPI below target in '20-'21 and warned that economic slack may result in lower than expected underlying CPI readings moving forwards, although it does expect headline CPI to pick up in the short term on the back of food price dynamics.
• "Possible future adjustments to the current degree of monetary stimulus would occur with additional gradualism and would depend on the perception of the fiscal trajectory, as well as on new information that changes the Committee's current assessment about prospective inflation."
• "Despite the asymmetry on its balance of risks, the Copom does not intend to reduce the monetary stimulus unless inflation expectations, as well as its baseline scenario inflation projections, are sufficiently close to the inflation target at the relevant horizon for monetary policy, which currently includes 2021 and, to a lesser extent, 2022. This intention is conditional on the maintenance of the current fiscal regime and on the anchoring of long-term inflation expectations."
• On growth, the bank continued to flag a high level of uncertainty in the wake of the partial recovery witnessed in recent times, stressing the risk premium could jump dependent on the fiscal path that Brazil takes.
• "The Copom also stresses that uncertainty regarding the continuation of the reform agenda and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate."
• Full statement