Brazil’s Monetary Policy Committee (Copom) decided, unanimously, for the third straight month, to maintain the country’s annualized benchmark interest rate at 19.75%.
In the most recent official acts of the Committee, made public on July 26, the Copom signaled that the Selic would be held at this level for a “sufficiently long period” to ensure the inflation target for 2005, already raised from 4.5% to 5.1%.
Inflationary pressures have already led the Copom to increase the Selic rate between September, 2004 and May of this year. During this period the Selic was raised from 16% to 19.75%.
“Avoiding the possibility of a future acceleration of inflation is crucial for the process of the resumption of economic activity begun in 2003 to continue in a healthy and balanced manner,” the Copom reported in its acts of September, 2004.
The process of raising the interest rate ended in June, reflecting the deflation that occurred in that month. Since then the rate has been kept at the level of 19.75%, with expectations that it will be reduced.
The definition of the benchmark interest rate takes into account factors such as the inflation forecast for the next 30 days and momentary price trends (upwards or downwards) in the economy.
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