Mapping the Path Ahead

BRAZIL ECONOMICS - Report 20 Sep 2021 by Affonso Pastore, Cristina Pinotti and Paula Magalhães

THE MONETARY POLICY MAP – Next Wednesday, the COPOM will probably raise the SELIC rate by 100 basis points. After many fits and starts and confusing signs, the Bank’s president finally recognized that it will do “whatever it takes” to bring inflation back to the target. All the signals given so far (forward guidance followed by indication of only a partial adjustment) were that the reaction curve placed excessive weight on economic growth, with less concern for inflation. The result is reflected in Graph 1, which shows that although the Bank’s worry over inflation this year has been much less than was the case in 2011, the inflationary outcome has been very similar.

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