Central Bank Reduces Selic to 10.75% and Signals Possible Slowdown in Future Cuts

In Short:

The Copom - Monetary Policy Committee of the Central Bank, cut the benchmark interest rate (Selic) by 0.50 percentage points for the sixth consecutive time, reducing it from 11.25% to 10.75% per year. A change in tone was evident in the statement released after the committee's meeting, indicating the possibility of a change in the pace of future cuts.

"The committee believes this is the appropriate approach to maintain the necessary contractionary monetary policy for the disinflation process," the statement said. The change in tone was already expected by market analysts, due to indicators showing stronger economic activity than initially anticipated, with potential impacts on inflation.

In the statement, the Copom mentioned that, "due to increased uncertainty and the consequent need for greater flexibility in conducting monetary policy," it anticipates a reduction "of the same magnitude (i.e., 0.5 percentage points)" only "at the next meeting" - no longer "at the next meetings," as indicated in previous communications. The next committee meeting is scheduled for May 7th and 8th.