The Minutes of the Monetary Policy Committee (Copom) meeting of the Central Bank of Brazil will be released today, marking the second such event of the Bank this year, and the last one before Brazil’s presidential election. After keeping its key rate unchanged at an all-time low in spite of the raising inflation risks, a few explanations and descriptions of the economic factors that led to this decision will help forex traders and private investors understand in which direction the economy of Brazil is heading to, and what the agenda behind the unexpected decision was.
The Brazilian Central Bank’s Monetary Policy Committee (Copom) announced last week that it had decided to maintain its key rate (SELIC) at an all-time low of 6.50 percent, in line with the forecasts. Led by President Ilan Goldfajn, the bank’s nine-member board left the rate unchanged for four consecutive meetings now, claiming that the recent economic indicators show development in Brazil’s economy and the measures to bring inflation to the target rate are still under evaluation.
However, given the current political uncertainty regarding the presidential elections, they indicated that they might move the rate. “Stimulus will begin to be removed gradually if the outlook for inflation at the relevant horizon for the conduct of monetary policy and/or its balance of risks worsen,” the Central Bank said in its policy statement.
The devaluation of Brazil’s local currency has been quite steady for a while, now more than ever, due to the unsecure political climate and other international movements. The latest major depreciation of the local currency took place this month, on September 6, against the USD, which registered an appreciation of 1.21 percent during the day and closed at R$4.20/US$1.
Forex traders should stay updated and follow up on this event, because the provided insights will be extremely useful, as the upcoming presidential election is affecting Brazil’s currency volatility and the inflation course might move the SELIC rate.