Another 50bp adjustment of the SELIC rate

As in the previous two meetings, the Monetary Policy Committee (COPOM) decided to hike the SELIC rate by 50bp to 12.75% (vs. 7.25% two years ago). The remaining uncertainties about the government's ability to deliver a fiscal adjustment amid a turbulent political environment, the ongoing weakening of the Brazilian real (the exchange rate neared R$3 yesterday, accumulating a 32% depreciation in the last twelve months) and very high inflationary pressures (inflation is now above 7.0% and there are no perspectives of significant moderation ahead) are certainly behind the BCB's decision to continue to tight monetary conditions at a 50bp pace in spite of the increasing deceleration of domestic demand.

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