Has the Central Bank Increased its Degrees of Freedom?

BRAZIL ECONOMICS - Report 14 Oct 2013 by Marcelo Gazzano, Cristina Pinotti and Affonso Pastore
At the COPOM meeting last week the Central Bank decided to raise the SELIC rate by 50 basis points, to 9.50%. This move had already been widely expected by the market, but the repetition of basically the same communiqué as issued after the previous meetings that were followed by 50-point increases was interpreted as an indication that at least one more equal hike will occur in November. More precisely stated, the indication is of a tightening cycle greater than previously expected, breaking what was supposed to be a “political barrier” imposed by the Rousseff administration on the basic int...

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