Monetary Policy: A New Signal

BRAZIL ECONOMICS - Report 26 Oct 2015 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

The COPOM kept the interest rate at 14.25%, but stopped indicating the intention to attain the inflation target of 4.5% in 2016. Because of the deepening recession and inflationary shock coming from the loosening of fiscal policy, the Central Bank announced it will maintain the SELIC rate at 14.25% for an extended period, and that the 4.5% target (possibly) will only be reached in 2017. This means that monetary policy will be accommodative, resulting in a long period of above-target inflation rates.

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