Brazil central bank sees tight policy weighing on economy

econews. The central bank released minutes from its latest rate-setting meeting, where policymakers delivered a fourth consecutive 25-basis-point reduction, bringing the Selic rate to 14.00%. The minutes showed officials took a more positive view of both inflation and growth trends, while choosing not to provide guidance on future policy moves.

The committee stated it will continue to evaluate new information and monitor economic developments to maintain monetary policy at levels restrictive enough to ensure inflation converges to the target.

Policymakers emphasized the importance of watching for potential second-round inflation effects from supply shocks and taking decisive action if such effects appear. The minutes simplified earlier references to inflationary impacts from the U.S.-Israel conflict with Iran.

Regarding economic activity, the central bank noted that recent data indicates a slowdown in the transition from the first to the second quarter. This deceleration was observed across both supply and demand components of total output. The bank highlighted that a cooling economy is necessary for returning inflation to its 3% target.

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