Here comes the sun
There was no surprise regarding Copom’s decision to maintain the target for the benchmark Selic rate at 15.00% per year. It was also expected that the post-meeting communication would unlock the door that had kept an interest rate cut remote, by removing from the statement the expression:
“To ensure the convergence of inflation to the target in an environment of unanchored expectations, a significantly contractionary monetary policy stance is required for a fairly prolonged period.”
In this sense, not only did the statement following the meeting eliminate this paragraph, but—going even further—virtually announced that the long-awaited Selic cut should take place at the next meeting. According to Copom:
“The Committee foresees, should the expected scenario be confirmed, starting the monetary easing cycle at its next meeting, while reinforcing that it will maintain an appropriate degree of restriction to ensure inflation convergence towards the target.”
This admittedly reduces part of the fun that comes from analyzing Copom’s communication in search of clues regarding future monetary policy moves (though not entirely, as will be discussed below). This was already the case throughout much of the tightening cycle, when the Committee took care to clearly signal the steps of forthcoming meetings.
Now read on...
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