Copom begins meeting to define the basic interest rate; expectation is for it to remain at 15% per year.

Pedro Peduzzi - Reporter for Agência Brasil

The Monetary Policy Committee (Copom) meets today (16) and this Wednesday to define what the basic interest rate of the economy (Selic) will be. Formed by the president of the Central Bank (BC) and its directors, Copom meets, for two consecutive days, every 45 days.

At the previous meeting, held on July 29 and 30, Copom decided to interrupt the interest rate hike cycle, maintaining the Selic rate at 15% per year, under the justification that the external environment is more adverse, due to the trade and fiscal policies adopted by the United States (US).

The committee's decision also took into account the fact that inflation was still above the target.

According to the Central Bank, the Copom meeting follows a "process that seeks to provide the best possible basis for its decision." During the meeting, members attend technical presentations by the Central Bank's staff.

perspectives

Among the topics discussed in determining the Selic rate are the evolution and prospects of the Brazilian and global economies, liquidity conditions, and market behavior.

Decisions are therefore made taking into account the inflationary situation, public finances, economic activity, and the external environment – ​​all based on an assessment of the macroeconomic scenario and the main risks associated with it.

All Copom members present at the meeting vote and their votes are detailed later.

“Copom’s decisions are made with the aim of ensuring that inflation measured by the IPCA [Broad Consumer Price Index] is in line with the target defined by the CMN [National Monetary Council],” explains the BC.

The minutes of the Copom meetings are published within four business days after the meetings.

"Once the Selic rate is set, the Central Bank acts daily through open market operations – buying and selling federal government bonds – to keep the interest rate close to the value defined at the meeting," explains the monetary authority on its website.

Selic

To achieve its inflation target, the Central Bank uses the Selic as its main instrument. When Copom raises the benchmark interest rate, the goal is to curb heated demand, which impacts prices because higher interest rates make credit more expensive and encourage savings.

Banks consider factors other than the Selic rate when determining the interest rate to be charged to consumers, including default risk, profit, and administrative expenses.

Thus, higher interest rates can also hinder economic expansion. When the Selic rate is reduced, credit tends to become cheaper, encouraging production and consumption, reducing inflation control and stimulating economic activity.