By Andre Romani
SAO PAULO (Reuters) – Brazil’s central bank on Wednesday kept interest rates unchanged at a second consecutive policy meeting, as expected, flagging a need for “more vigilance” with monetary policy due to worsening inflation expectations and recent market swings.
The bank’s rate-setting committee, known as Copom, held the Selic benchmark interest rate at 10.50% in a unanimous decision, in line with forecasts from all 40 economists polled by Reuters.
Inflation has outpaced expectations and Brazil’s currency has depreciated nearly 4% since the bank’s last policy meeting in mid-June, flirting with more than two-year lows amid investor concerns about fiscal discipline.
“The Committee judges that the domestic and international environments require even greater caution on the conduct of monetary policy,” wrote policymakers in their policy statement.
“In particular, the inflationary impacts of the movements of market variables and inflation expectations, if persistent, corroborate the need for more vigilance,” they added.
Inflation projections for this year climbed to 4.10% in the latest central bank survey, more than a full percentage point above the 3.0% center of an official policy target.
Sticky services inflation also pushed up consumer prices more than forecast in the month to mid-July, driven up higher fuel and airfare costs.