The decline in inflation and the economic slowdown led the Brazilian Central Bank to leave interest rates unchanged. Unanimously, the Monetary Policy Committee (Copom) kept the Selic rate, the economy’s benchmark interest rate, at 15 percent per year.

In a statement, Copom gave no indication of when it might begin to cut interest rates. As in its last meeting, it reiterated that the current scenario is marked by significant uncertainty, which requires caution in monetary policy, and that the bank’s strategy is to maintain the current Selic rate for an extended period.

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“The committee believes that the present strategy of maintaining the current interest rate for a prolonged period is appropriate to ensure that inflation converges with the target. The committee emphasizes that it will remain vigilant, that future monetary policy steps may be adjusted, and that, as usual, it will not hesitate to resume the adjustment cycle if it deems it appropriate,” the statement said.

This is the fourth consecutive meeting in which Copom has kept the basic interest rate unchanged. The rate is at its highest level since July 2006, when it stood at 15.25 percent per year. The Selic rate reached 15 percent per year at the June meeting and has remained at that level since.

Inflation

The Selic rate is the Central Bank’s main tool for curbing Brazil’s official inflation, as gauged by consumer price index IPCA. In November, it stood at 0.18 percent, the lowest level for the month since 2018. With this result, the index has accumulated a 4.46 percent increase over 12 months, returning to within the ceiling of the continuous inflation target.

Under the new continuous target system, in effect since January, the inflation target to be pursued by the Central Bank, as defined by the National Monetary Council, is 3 percent, with a tolerance interval of 1.5 percentage points above or below. In other words, the lower limit is 1.5 percent and the upper limit is 4.5 percent.

In this model, the target is calculated monthly based on the accumulated inflation over the previous 12 months.

The basic interest rate is applied in government bond trading through the Special Settlement and Custody System (Selic) and serves as a benchmark for other interest rates in the economy.