By Marcela Ayres
BRASILIA, Dec 10 (Reuters) – Brazil’s central bank held interest rates at a nearly two-decade high on Wednesday for the fourth consecutive meeting, and kept a hawkish tone by stressing the need to maintain borrowing costs steady “for a very prolonged period.”
The bank’s rate-setting committee, known as Copom, unanimously voted to leave the benchmark Selic rate at 15%, its highest since July 2006, as expected by all 41 respondents in a Reuters poll.
As the decision was widely expected, investor attention focused largely on Copom’s little-changed policy statement for clues to when an easing cycle might begin in Latin America’s largest economy, which has shown signs of cooling.
Policymakers noted the “resilience” of the Brazilian labor market, compared to last month when they said it was “still showing strength.”
Since the November meeting, Brazil’s third-quarter gross domestic product grew just 0.1% from the previous quarter, losing momentum as weaker household consumption weighed on activity.
Consumer inflation has also continued to ease on a 12-month basis, helped by lower commodity prices such as food and oil. Figures released on Wednesday showed annual inflation at 4.46% in November, the lowest in more than a year, while inflation expectations, closely watched by the central bank, have also retreated.
Despite the softer backdrop, central bank chief Gabriel Galipolo has noted that both expectations and actual readings, although improving, remain above the bank’s 3% target – a message repeated in the policy statement.
He has also sought to temper market expectations by arguing that the central bank does not need to pre-announce when it might change course, stressing that decisions will depend on continuous assessment of incoming data.
(Reporting by Marcela AyresEditing by Brad Haynes)
