MNI BRIEF: Prolonged Tightening If Expectations Worsen - BCB
MNI (BRASILIA) - A further deterioration in inflation expectations could lead to a more prolonged monetary policy tightening cycle, the Central Bank of Brazil said in minutes from its last meeting, released on Tuesday.
"Copom believes that the conduct of monetary policy is a fundamental factor in reanchoring expectations and will continue to make decisions that safeguard credibility and reflect the fundamental role of expectations in inflation dynamics. A further deterioration in expectations could lead to a more prolonged monetary policy tightening cycle," the document stated.
The BCB decided to hike its official Selic rate by 50 basis points to 11.25% last week, accelerating its tightening pace while remaining data-dependent for future steps.
"The Committee incorporates in its scenarios a slowdown in the growth rate of public spending over time and reinforces the need for sustainable fiscal rules," the minutes emphasized. (See MNI INTERVIEW: BCB To Keep 50BP Pace in December -Goldenstein)