Convergence of Brazil's inflation pushed forward

The Copom decided this evening to keep the Selic interest rate at 14.25%, unanimously, given the macroeconomic outlook, inflation perspectives, and the current balance of risks.

There are two differences in the post-decision statement of the BCB. The committee repeated the message that keeping the Selic rate at the current level for a sufficiently prolonged period is necessary to converge inflation to the mid-point of the target. The convergence is expected in the relevant horizon for monetary policy, whereas in the previous meeting, it was targeted to happen by the end of 2016.

Further to the time horizon for the convergence, another difference in the statement is the Committee's commitment to remain vigilant in order to attain to this goal. It is believed that the BCB could make a soft commitment in the post-decision statement to use monetary policy to assure that second-round effects from the FX and regulated price increases are contained within this year, says Barclays.

Next week's meeting minutes will be important to gauge the strength of the above commitment and how the Copom will treat the change in the horizon for inflation convergence.