The Monetary Policy Committee (Copom) of the Central Bank released, this Tuesday (23), the minutes of its last meeting, held last Thursday (18), which decided on a cut of 0.25 percentage points in the Selic rate, to 14.25% per year.
According to the document, the adjustment does not represent a change in the cautious stance of the monetary authority in the face of a scenario still marked by high inflation and increased external uncertainties.
According to the directors, the international environment remains adverse due to conflicts in the Middle East and uncertainties about US economic policy, factors that have increased market volatility and commodity prices.
Domestically, the Copom (Monetary Policy Committee) highlighted that economic activity accelerated in the first quarter, with a resilient labor market and income-sensitive sectors maintaining robust performance. At the same time, the latest inflation readings were surprisingly low, with the Broad Consumer Price Index (IPCA) exceeding the upper limit of the target.
The monetary authority's projections also remain above the inflation target. The expectation for inflation in 2026 is 5.2%, while the projection for the fourth quarter of 2027 — the relevant horizon for monetary policy — reaches 3.7%, above the 3% target.
The minutes also highlight that inflation expectations remain unanchored and that this scenario requires a more restrictive monetary policy for a longer period. According to the Committee, the cost of bringing inflation back to target increases when economic agents begin to project persistently high rates.
During the discussions, the Copom members evaluated alternatives for the trajectory of interest rates, but concluded that abrupt movements in the Selic rate could generate excessive volatility in the markets. The committee ultimately reinforced that the next steps will depend on the evolution of inflation and the economic effects of geopolitical conflicts.
This text was translated by machine from Brazilian Portuguese.