5/29/2014 9:15:35 AM

At its two-day meeting ended on May 28th, 2014, the Central Bank of Brazil decided to leave the Selic rate on hold at 11 percent following last month’s hike, as the pace of price increases is slowing and the economy remains fragile.

The central bank said the decision was unanimous.
Policymakers have raised the Selic rate nine times in the last thirteen months, from a record low of 7.25 percent to the current level of 11 percent, aiming to curb persistently high inflation rate. At its April meeting, the Copom recognized that high inflation poses risks to growth and said it will monitor the evolution of the macroeconomic scenario to decide the next steps in its monetary policy strategy.
Annual consumer prices increased 6.3 percent in April, the highest level in ten months and closer to the 6.5 percent upper limit of the central bank’s target range. However, recent Selic hikes are having a delayed effect on prices and inflation is expected to slow in the coming months, the central bank’s president said earlier in May. Yet, prices rose at a slower 0.58 percent month-over-month in mid-May compared with a 0.78 percent increase in the month through mid-April.
Amid inflation concerns, the economic outlook remains weak. Industrial production contracted twice in the first quarter, retail sales shrank 1.1 percent yoy in March and central bank’s economic activity index fell by a seasonally adjusted 0.11 percent in March over the previous month.