Brazil's Monetary Policy Committee (Copom) announced a reduction of 0.50 percentage points in the basic interest rate, which now stands at 12.25% per year.
This decision was taken in a context of economic challenges both globally and domestically.
On the international scene, the Copom noted that longer-term interest rates in the United States have increased, inflation remains high in several parts of the world and geopolitical tensions continue to exist. These adverse factors led the central banks of the main economies to seek convergence of inflation rates towards their targets, which, in turn, demands caution from emerging countries.
At the domestic level, the Copom found that economic activity indicators are in line with the prospect of a slowdown in the coming quarters.
Although consumer inflation is on a disinflation path, it is still above the range compatible with the inflation target . Furthermore, underlying inflation measures are also above target.
Copom's projections for future inflation indicate the need for vigilance
due to risk factors in both directions, including persistent global inflationary pressures and resilience in services inflation . The current situation is marked by uncertainty, which requires serenity and moderation in the conduct of monetary policy.
The Committee emphasizes the importance of fiscal targets to anchor inflation expectations and, consequently, the conduct of monetary policy . Reductions in the basic interest rate aim both at the convergence of inflation towards the target and at economic stability. The Copom anticipates further reductions in the next meetings , maintaining a contractionary policy while disinflation and anchoring of expectations are consolidated. The decision to reduce interest rates was unanimous among the Committee members.