O Copom (Monetary Policy Committee) of the Banco Central decided to reduce the Selic rate at 0.25 percentage pointstaking it to 14.25% per year. The decision, released on Wednesday night (17), was accompanied by an extensive statement that generated wide discussion among economists and market agents.
For Silvia Ludmer, from Andbank, the statement was, at the same time, long and confusing. “Confused, confused, I agree,” said the economist, reporting that groups of experts were “disoriented” after reading the text.
According to her, instead of clarifying the Central Bank’s thinking, some paragraphs of the document made the environment “more uncertain, more confusing”. Ludmer even stated that he did not remember “a recent Copom that caused so much buzz”.
Contradictions in the statement
The economist identified two movements that she considers contradictory in the text.
In the first, the Central Bank listed a series of concerns — such as the revival of economic activity, low unemployment, worsening inflation expectations and rising food prices — to then justify the continuation of interest cuts.
“We started reading and said: wow, he’s really toughening up his tone, he’s worried.
And then, suddenly, in the text itself, he makes a fool of himself and starts to justify why,” explained Ludmer.
The second point of controversy was to broaden the horizon of its monetary policy.
Instead of projecting inflation for the first quarter of 2027 — usual practice —, the institution started targeting the first quarter of 2028. According to Ludmer, this change allowed the BC to present a projected IPCA closer to the 3% target, thus justifying the cuts.
“If I keep looking further and further ahead, then it will happen. But, in truth, it shouldn’t happen, because it’s a kind of steal,” said the economist.
Inflation projections worsen with each meeting
Ludmer also highlighted that the Central Bank’s inflation projections have deteriorated consecutively. In March, the IPCA projected for the relevant horizon was 3.3%. In April, it rose to 3.5%.
At Wednesday’s meeting, it reached 3.7% — increasingly distant from the 3% target. “They are getting worse, they are getting further and further away from the target”, he warned.
Tension between monetary and fiscal policy
In addition to external factors, such as the war mentioned in the statement, Ludmer pointed out that the domestic environment also makes disinflation difficult.
Government stimulus packages — including vehicle financing facilities, income tax cuts and low-income energy exemption programs — injected, according to her, between 150 and 200 billion reais into the economy, boosting consumption.
One wants to step on the brake and the other steps on the accelerator and steps hard”, summarized the economist, describing the tension between the Central Bank’s restrictive monetary policy and the government’s expansionist fiscal policy.
The market’s reaction reflected this uncertainty: prices fell, while long-term prices rose. For Ludmer, this movement signals a loss of credibility for the Central Bank.
“We no longer know if he will really be able to deliver the target he needs, together with the government which also, instead of helping with disinflation, gets in the way”, he concluded.
