Copom Keeps Interest Rates High Amid Inflation Concerns

The Central Bank's Monetary Policy Committee has reinforced the need to keep interest rates at a restrictive level for a longer period. The committee highlighted that the current scenario of unanchored inflation expectations demands a more rigorous stance than previously planned.

The decision to halt the rate-cutting cycle and stabilize the benchmark interest rate was unanimous. The Central Bank justifies the move by citing inflation pressured by demand and the need to ensure price convergence toward the official 3% target.

The document notes that a lack of fiscal discipline and doubts regarding the public debt trajectory increase the cost of controlling inflation. The committee assesses that the risk perception surrounding the sustainability of government accounts reduces the effectiveness of monetary policy and impacts economic activity.

Projections for the coming years remain above the target with estimates of 5.6% for 2026 and 4.7% for 2027. The Central Bank is closely monitoring second-round effects and states that firmness in policy conduct is essential to reanchor expectations.

The committee emphasized that coordination between fiscal and monetary policies is fundamental. The monetary authority argues that predictable and credible policies are indispensable to reduce the risk premium and facilitate the return of inflation to desired levels.