Brazilian economic growth has slowed more than anticipated this year and inflationary pressures have eased, minutes of the central bank’s recent policy meeting showed on Tuesday, suggesting policymakers were in no rush to raise interest rates.
While the Brazilian economy remained on a “gradual recovery path,” policymakers now view risks to inflation as “symmetric,” compared with “asymmetric” to the upside at their previous meeting.
Doubts about the success of a proposed pension reform and a precarious global outlook mean policymakers will be patient in assessing Brazil’s economy and in no rush to change policy, the minutes said.
Their decision to keep the benchmark Selic rate on hold at a record low 6.50 percent was unanimous.
The minutes of the March 19-20 meeting showed that the central bank’s rate-setting committee, known as Copom, believed inflation would peak around April or May this year before easing back to this year’s target of 3.9 percent.
Fresh data on Brazilian consumer prices on Tuesday showed a decent rise in inflation in the month to mid-March, reinforcing Copom’s view that inflation had yet to peak.
“The minutes have a dovish lean … but do not imply any rush to cut rates, instead advocating patience,” analysts at Citi wrote in a note. “Rates are seen below neutral unless the fiscal situation improves. This makes pension reform a more important driver for Brazilian rates than the minutes per se.”
Copom, under the stewardship of new central bank chief Roberto Campos Neto for the first time, also noted the outlook for global growth had deteriorated since the committee’s Feb. 5-6 meeting.
Brazilian financial markets have been highly volatile in recent days, tumbling amid concern that poor coordination in Congress would delay and dilute pension reform. The Bovespa stock index lost 5.5 percent last week, Brazil’s currency hit its weakest levels of the year, and bond yields soared.