MNI BRIEF: Copom Raises Estimate For Neutral Rate - Minutes

Brazil's Central Bank raised its estimate for the neutral real interest rate to 4.75% from its previous 4.5%, minutes from the last meeting showed on Tuesday. The board evaluated scenarios with a neutral rate between 4.5% and 5%, as many of the models presented indicated values in this range.

"The lack of commitment to structural reforms and fiscal discipline, the increase in earmarked credit granting, and the uncertainties about the stabilization of public debt have the potential to raise the neutral interest rate of the economy," the minutes said.

The BCB held its official Selic rate at 10.50% last week after nearly a year of aggressive easing. Copom’s unanimous decision contrasted with the split vote for a 25bp cut in May, when four dissenters called for a 50bp reduction.

"The Committee unanimously believes that the reanchoring of inflation expectations should be pursued, regardless of the sources behind the currently observed deanchoring," stressed the document. (See MNI INTERVIEW: Brazil's Copom On Hold Until December - Kfoury)