🇧🇷✋💰 — The Central Bank of Brazil kept the benchmark interest rate unchanged, as widely expected by the market. All directors of the monetary authority agreed to pause the rate-cutting cycle that began in August of last year when the Selic rate was at 13.75%

❗️ The committee cited economic uncertainties and the unanchoring of inflation expectations as the main reasons for ending the cycle of cuts:

"The Committee unanimously chose to halt the rate-cutting cycle, highlighting that the uncertain global scenario and the domestic scenario marked by resilience in activity, rising inflation projections, and unanchored expectations demand greater caution. Furthermore, it emphasizes that monetary policy should remain contractionary for sufficient time at a level that consolidates not only the disinflation process but also the anchoring of expectations around its targets."

🤡 The unanimous decision among the committee members (9x0) weakens Lula's rhetoric that Central Bank President Roberto Campos Neto is to blame for the current Selic rate and should reassure the market, which, after the divided decision in the May meeting, began to suspect that a majority of Lula appointees would be more lenient in combating inflation.

💬 In an interview, Lula said that for Campos Neto's replacement, he would appoint a mature, seasoned, responsible person. "Someone who has respect for the position they hold and someone who does not submit to market pressures," he stated, which was seen as a signal to the directors appointed by him to continue easing monetary policy.

⭐ For now, the pressure did not work, but it is expected that, to compensate, Lula will seek even more subservient names for the monetary authority from now on.

Source 🖇