By Jeffrey T. Lewis and Paulo Trevisani
SÃO PAULO–Brazil’s central bank left its benchmark lending rate unchanged Wednesday and reiterated that it won’t hesitate to resume tightening if inflation doesn’t slow as expected.
The bank’s monetary policy committee, known as the Copom, left the Selic rate at the six-year high of 13.75%, where it has been since August of last year. The bank began raising the rate early in 2021 to try to slow inflation, which hit an almost 19-year high of 12.13% last April.
The bank said that expectations for longer-term inflation have deteriorated since its last policy meeting and that policy makers will change their strategy if necessary to make sure price increases continue to slow.
“The committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets,” the bank said in its statement. The committee “will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected.”
The bank’s policy makers are closely watching the new government of President Luiz Inácio Lula da Silva for clues about its fiscal policy after Congress approved a constitutional amendment in late December allowing the administration to breach spending limit rules this year. Mr. da Silva’s government is still working on proposals to allow increased spending next year and in 2025, as well.
“We need to see more about what they’re talking about for next year. The government keeps talking about stimulus, about spending, so we need to see where that’s going,” said Tatiana Nogueira, an economist at XP Investimentos.
Write to Jeffrey T. Lewis at [email protected]
(END) Dow Jones Newswires
02-01-23 1711ET
