Brazil's central bank held its Selic benchmark rate at 13.75% on Wednesday, ending a run of cuts that began in March. Policymakers face the prospect of higher inflation after President Luiz Inacio Lula da Silva's reelection, and they offered little guidance on next steps.
Brazil's central bank ended its run of interest rate cuts on Wednesday, keeping borrowing costs on hold as it weighs the prospect of higher inflation following Lula's reelection. The cuts had begun in March.
The rate-setting committee, Copom, voted unanimously to keep the Selic at 13.75%. That matched the expectation of 33 of 48 economists polled by Reuters.
A statement light on guidance
However, the statement offered little guidance on the bank's next steps. Policymakers pledged to keep monetary policy "adequately restrictive" to return inflation to target.
Policymakers said inflation risks appeared tilted to the upside. Yet they also noted a more pronounced slowdown in domestic economic activity, and said the challenging outlook called for caution on how to proceed.
Markets repriced after the runoff
The decision follows a sharp fall in the value of Brazil's currency and its stock market after Lula's surprise turnaround victory over senator Flavio Bolsonaro in an election runoff on October 25.
Immediately before the election, investors were largely pricing in two consecutive 25-basis-point rate cuts, one in November and another next month. By Wednesday, options contracts traded on Brazil's exchange suggested investors expected rates to remain unchanged.
Source: Reuters via Investing.com
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