Tuesday, October 3, 2023
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Brazil's central bank says final rate hike sparks widespread debate

BRASILIA (Reuters) – Brazil’s central bank stressed on Tuesday a lack of consensus among policymakers on last week’s decision to pause an aggressive monetary policy cycle, noting that further “remaining” interest rate hikes were “widely discussed”.

in its September – In the minutes, policymakers reinforced their cautious stance on fighting inflation despite recent data showing that price pressures eased after the government cut fuel and energy taxes.

Decision to leave benchmark Selic 12.12% 21 rate after consecutive rate hikes were voted 7 to 2, the first split decision since March 2016, opponents voted for the final result 12 – a basis point hike.

“On the one hand, additional rate hikes would reinforce a vigilant stance and reflect stronger-than-expected activity observed,” st minutes.

“On the other hand, prudence and the need to assess over time the cumulative effect of the intensive and timely monetary policy cycle that has been undertaken will favor maintenance.”

Most Copom members concluded that rates were already in significant contraction territory, with data and inflation expectations supporting the end of the tightening cycle, taking Selic rates from a record low of 2% in March 2021 .

But the central bank re-emphasized that it may resume raising interest rates if deflation does not meet expectations.

The hawkish tone was seen as an attempt by policymakers to undo market bets that monetary easing could begin as early as 2023 as inflation slows in Latin America’s largest economy.

Consumer prices declined between 12 months to mid-September to the 7th. 96%, after reaching double digits from September 2021 to July.

Central bank said in minutes of meeting that Bradesco Bank said in a note to clients that it would expect a lower inflation index Levels are less sensitive.

“We maintain the assumption that the tightening cycle is over and the cuts should only start in the middle of next year,” wrote Fernando Barbosa, director of research and economics.



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