MNI BRIEF: BCB Dissenters Wanted To Follow Guidance-Minutes
Dissenting members of Brazil's Central Bank who voted for a 50 basis-points cut last week argued for following guidance.
Dissenting members of Brazil's Central Bank who voted for a 50-basis-point reduction in interest rates last week said that there could be negative consequences from not following the guidance for a cut of that magnitude, minutes from the last meeting showed on Tuesday.
The dissenters said the BCB should stick to its guidance as in previous meetings, while "reaffirming the firm commitment to the target and the required terminal interest rate to achieve the Committee’s primary objective of inflation convergence to the target". The board reduced its Selic official rate by 25bp, to 10.50%, with four dovish votes, all from appointees by President Luiz Inacio Lula da Silva.
The dissenters argued that inflation projections were more affected by the level of the terminal rate and that the reduction of 50bp would keep monetary policy "sufficiently contractionary". The dissenters also emphasized the need for flexibility in the decisions from June. (See MNI POLICY: Copom Dissenters Feared Reaction Function Misstep)