Brazil Interest Rate

The central bank of Brazil reduced its key Selic rate by 50 bps to 10.75% in its March meeting, in line with expectations. The Committee observed the current external environment remains volatile, characterized by ongoing debates surrounding the initiation of monetary policy easing in major economies and the pace of inflation decline globally. Domestically, economic activity indicators aligned with the Copom's anticipated slowdown scenario. Although headline consumer inflation shows a disinflation trend, underlying inflation measures exceeded the target in recent releases. Copom projects 3.5% and 3.2% inflation for 2024-25. They cut the interest rate to aid convergence to target inflation and stabilize economic activity. The Committee underscores the need for fiscal targets to anchor inflation expectations and plans further reduction if the current scenario persists, aiming for prudence and moderation in monetary policy amidst global uncertainties.