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br	copom_minutes_20221026.txt	1. The global environment remains adverse and volatile, with downward revisions on prospective global growth. The tightening of the financial conditions in major economies, the persistence of the war in Ukraine with its consequences on energy supply to Europe, and the continuation of the Covid-19 policy in China reinforce a prospect of a slowdown in global growth in the coming quarters. 2. The inflationary environment remains challenging. There is an incipient normalization in supply chains and an accommodation in the prices of major commodities in the recent period, which should lead to a moderation in global goods-related inflationary pressures. In turn, the low level of labor market slack in some economies, coupled with high current inflation and a high degree of diffusion, suggests that inflationary pressures on the services sector may last longer. 3. The process of normalization of monetary policy in advanced economies continues towards contractionary rates synchronized across countries, tightening financial conditions, impacting economic growth expectations, and raising the risk of abrupt repricing movements in the markets. The Committee noted a stronger market sensitivity to fiscal fundamentals, including in advanced economies. This greater sensitivity, concomitant with tightening financial conditions, requires more attention from developing economies. The Committee continues to monitor the risks related to the global slowdown and the increase in risk aversion in a highly pressured inflationary environment. 4. Turning to the Brazilian economy, the set of indicators released since the previous Copom meeting continues to signal growth, albeit at a more moderate rate. The labor market continues to recover, but at a slower pace than in previous months. 5. Despite the recent reduction, driven by items which are more volatile and affected by tax measures, consumer inflation remains high. The recent releases have been strongly influenced by the reduction in administered prices, due to both the decrease in taxes and, to a lesser extent, the drop in international fuel prices. In addition, items related to industrial goods, reflecting the more intense decrease in producer prices and the reduction of pressures in global value chains, also showed deceleration. However, the inflation of the components more sensitive to the economic cycle and the monetary policy, which present greater inflationary inertia, remain above the range compatible with meeting the inflation target. Inflation expectations for 2022, 2023, and 2024 collected by the Focus survey are around 5.6%, 4.9%, and 3.5%, respectively. 6. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.252 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “green” in December 2022, and “yellow” in December 2023 and 2024. In this scenario, Copom’s inflation projections stand at 5.8% for 2022, 4.8% for 2023, and 2.9% for 2024. Inflation projections for administered prices are -3.9% for 2022, 9.4% for 2023, and 3.8% for 2024. The Committee decided again to emphasize the six-quarter-ahead horizon, which reflects the relevant horizon, mitigates the primary effects from the tax changes but incorporates their second-round effects. On this horizon, which refers to the second quarter of 2024, the 12-month inflation projection stands at 3.2%. The Committee judges that the uncertainty in its assumptions and projections is higher than usual. 7. The Committee still considers that the commitment and determination of central banks to reduce inflationary pressures and anchor expectations raise the risk of a more pronounced global slowdown. There has been an adjustment in the extent and speed of the monetary policy tightening cycle in some advanced countries, which has led to a further tightening of financial conditions. 8. The Committee noted a stronger market sensitivity to developments affecting the fiscal fundamentals, including in advanced economies. The combination of higher interest rates and sovereign debts at historically high levels, raises questions about the sustainability of public debt in several countries. Besides, the lower liquidity of the sovereign securities markets increases risk perception and demand monitoring. 9. Data on economic activity, which contribute to the assessment of the degree of slack, point to a more moderate pace of growth recently. On the one hand, the momentum of the reopening of the economy in the services sector and the fiscal stimuli are still driving consumption growth, although these impulses should slow down. On the other hand, the impact of monetary policy and its lags point to a reduction in the pace of economic activity, which tends to worsen in the coming quarters. 10. The Committee discussed the already noticeable impacts of monetary policy on credit and economic activity data. One can notice an impact in recent data regarding both the composition of new household credit operations and the moderate increase in the delinquency rate, partly related to the behavior of the real disposable income, which suggests some reduction. The Committee observed that an additional challenge for the proper assessment of the dynamics of activity at the margin is in the seasonal adjustment of the series, especially of the indicators with a shorter sample period, due to the pandemic period. Exercises show a high sensitivity of the signal and the magnitude of the seasonally adjusted results to small changes in the samples and methods used. 11. In the domestic scenario, Copom believes that the permanent increase in spending and the uncertainty about its trajectory from next year on may increase the country's risk premia and inflation expectations as they put pressure on aggregate demand and worsen the fiscal path expectations. The Committee reiterates that there are several channels by which fiscal policy may affect inflation, including its effect on activity, asset prices, degree of uncertainty in the economy, and inflation expectations. 12. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; (ii) the uncertainty about the country's future fiscal framework and additional fiscal stimuli that support aggregate demand, partially incorporated in inflation expectations and asset prices; and (iii) an output gap tighter than the currently adopted by the Committee in its reference scenario, especially in the labor market. Among the downside risks, it should be noted (i) an additional reduction in the prices of international commodities measured in local currency; (ii) a greater than projected deceleration of global economic activity; and (iii) the continuity of tax cuts assumed to be reversed in 2023. The Committee assesses that the still uncertain and volatile current scenario requires serenity when evaluating risks. 13. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 14. The 12-month inflation projection for the second quarter of 2024, in the scenario using the interest rate trajectory extracted from the Focus survey, remains consistent with the strategy of inflation convergence to around the target over the relevant horizon. The Committee decided again to emphasize the six-quarter-ahead horizon for its projections, and stresses that this decision is conditional on the temporary nature of the taxes. Moreover, the Committee continues to consider that inflation projection for 2024 is also around the target. This assessment reflects the lower-than-normal visibility of the forward-looking scenario, which increases the uncertainty of the point projections communicated by the Committee over longer horizons. 15. Copom anticipates that, if the alternative scenario of maintaining tax exemption on fuels in 2023 materializes, it will again emphasize usual horizons that include the first quarter of 2023. However, it assesses that there will be no relevant impacts on the conduct of monetary policy since the primary effects of such measures are already being disregarded. 16. Copom began by discussing the evolution of the broad array of data monitored, the projections, inflation expectations, and the balance of risks. Inflation projections showed a slight increase at longer horizons, reflecting upward revisions for inflation of market prices in the short term and a small increase in the projection for administered prices. The Committee assesses that the projections remain at values consistent with the strategy of reaching a level around the target over the relevant horizon. Inflation expectations from the Focus survey showed a more pronounced drop at shorter horizons but remains relatively stable for longer ones. Risks remain high, requiring continuous monitoring and serenity in their assessment. Regarding the degree of slack in the domestic economy, the Committee continues to monitor different metrics and strategies for the assessment of the output gap, as well as for current and prospective activity, and considers that there has been some decrease in the estimated slack since its latest update. Copom reinforces that its projection incorporates an increase in slack throughout the monetary policy horizon, as a result of the monetary adjustment undertaken in recent quarters. Finally, the Committee is following with special attention the evolution of services inflation, which depends on both inflationary inertia and the output gap, and whose trajectory will become clearer over time. 17. Copom chose to maintain the interest rate, reinforcing the need to evaluate, over time, the accumulated impacts to be observed of the intense and timely monetary policy cycle already undertaken. Therefore, the Committee members assessed that, given the data released, projections, inflation expectations, the balance of risks, and the lags of the effects of the monetary policy already in significantly contractionary territory, it was appropriate to maintain the interest rate at 13.75% p.a. The Committee reinforced that it is necessary to remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation. 18. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee emphasizes that it will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 19. Considering the assessed scenarios, the balance of risks, and the broad array of available information, the Copom decided to maintain the Selic rate at 13.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks, and is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023 and 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 20. The Committee will remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee reinforces that future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 21. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza, and Renato Dias de Brito Gomes.
br	copom_minutes_20191211.txt
br	copom_minutes_20210616.txt	1. Regarding the global outlook, fiscal and monetary stimuli in some developed countries promote a robust economic recovery. Due to economic slack, central bank communication from major economies suggests monetary stimuli will last long. However, uncertainty remains high and a new round of market discussion regarding inflationary risks in these economies could result in a challenging environment for emerging economies. 2. Turning to the Brazilian economy, despite the intensity of the second wave of the pandemic, recent indicators continue to evolve better than expected, implying relevant revisions in growth forecasts. Risks to economic recovery were significantly reduced. 3. The various measures of underlying inflation are above the range compatible with meeting the inflation target. 4. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 5.8%, 3.8%, and 3.25%, respectively. 5. The persistence of inflationary pressure was more intense than expected, especially in industrial goods. Additionally, the slow pace of supply normalization, the resilience of demand and implications of the energy scenario deterioration over electricity fares contribute to keeping inflation under pressure in the short run, despite the Brazilian real (BRL) recent appreciation. The Committee continues to closely monitor the evolution of shocks and their possible second-round effects, as well as the behavior of service prices as the immunization effects over the economy become more relevant. 6. The Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at USD/BRL 5.052 and evolving according to the purchase power parity (PPP), stand around 5.8% for 2021 and 3.5% for 2022. This scenario assumes a path for the Selic rate that ends 2021 at 6.25% p.a. and rises to 6.50% p.a. in 2022. In this scenario, inflation projections for administered prices are 9.7% for 2021 and 5.1% for 2022. The energy flag is assumed to be neutral, remaining at "red level 1" in December each year. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, a possible reversion, even if partial, of the recent increase in the price of international commodities measured in local currency would produce a lower-than-projected inflation in the baseline scenario. 9. On the other hand, further extensions of fiscal policy responses to the pandemic that increase aggregate demand and deteriorate the fiscal path may pressure the country's risk premium. Despite the improvement of debt sustainability indicators, the elevated fiscal risk creates an upward asymmetry in the balance of risks,i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 10. Regarding the international outlook, the Committee assessed that the fiscal and monetary stimuli are promoting robust economic growth and that the latest inflation releases were surprising in several countries, both developed and emerging. For the Committee, further discussions about the risk of permanent increase in inflation in the United States could result in a challenging environment for emerging economies. The Copom noted that inflation of tradable goods in Brazil was higher than in several of its peer countries and that this process may reverse in the future, creating a new downside risk to inflation. The recent rise in the weight of tradable items in the inflation index should increase the relevance of this event. 11. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They considered that despite the intensity of the second wave of the pandemic, the latest available data have surprised positively. The duration of the problems of the supply chains were also discussed. For the Committee, the second half of the year should bring a robust recovery, as the effects of the vaccination are felt more broadly. The Committee noted that median Focus survey growth projections were significantly revised and became more optimistic than those in its baseline scenario. The Committee also assessed that the downside risks to inflation stemming from risks to the economic recovery have reduced significantly. 12. The Copom members then debated the level of economic slack. Although the economic slack as a whole is rapidly returning to the late 2019 level, the Committee considered that the pandemic is still producing heterogeneous effects across economic sectors, with consequences for recent and prospective inflation dynamics. The Copom judges that economic activity and formal labor market data suggest that the overall slack has declined faster than anticipated, despite the increase in the unemployment rate. 13. Next, the Copom discussed the implementation of monetary policy, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, which uses the interest rate path extracted from the Focus survey, inflation projections are in line with the target for 2022. The Committee judged that despite the more positive recent evolution, fiscal risks continue implying an upward bias in the projections. This asymmetry in the balance of risks affects the appropriate degree of monetary stimulus, thus justifying a path for monetary policy that is less stimulative than the path used in the baseline scenario. 14. The Copom then evaluated different normalization paths for the Selic rate. Considering the baseline scenario and the balance of risks, the Committee assessed that –should there be no changes in the inflation conditioning factors– subsequent uninterrupted interest rate increases, up to the level considered neutral, imply projections around the inflation target in the relevant horizon. Therefore, a normalization of the interest rate to this level has become appropriate. The Committee decided to communicate this decision, maintaining transparency about the monetary policy path implied in its projections, and reaffirming that this view will be systematically reassessed as changes in inflation determinants or in the balance of risks occur. 15. In light of the revision of the monetary policy path implied in its projections, the Committee evaluated a quicker reduction of monetary stimulus already on this meeting. Considering the various alternative scenarios, the Committee decided that the best strategy would be to maintain the current pace of stimulus reduction but highlighting the possibility of a quicker adjustment in the next meeting. In the Committee's view, this strategy has the following two advantages. 16. First, to accumulate more information regarding the traditional determinants of inflation and, in particular, some of its qualitative aspects: (i) the evolution of more inertial prices, as the services sector recovers, and (ii) the behavior of inflation expectations, both from the Focus survey and from market prices. 17. Second, to clarify the distinction between transparency about conditional projections and invariant monetary policy intentions. The unequivocal commitment of the Banco Central do Brasil is to inflation convergence to its target over the relevant horizon, and future monetary policy steps are freely adjusted to this objective as new information becomes available. Thus, indications about the future path of interest rates, whether for the next meeting or for the final level, are useful elements for understanding the response function of monetary policy. The information obtained in the period between Copom meetings modifies the assumptions present in the baseline scenario and in the balance of risks, and naturally changes the future path of interest rates. 18. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 0.75 p.p. to 4.25% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2022. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 19. At this moment, the Copom's baseline scenario indicates, as appropriate, a normalization of the policy rate to a level considered neutral. This adjustment is necessary to mitigate the dissemination of the temporary shocks to inflation. However, the Committee again emphasizes that there is no commitment with this plan, and that future steps of monetary policy could be adjusted to assure the achievement of the inflation target. 20. For the next meeting, the Committee foresees the continuation of the monetary normalization process with another adjustment of the same magnitude. However, a deterioration of inflation expectations for the relevant horizon may require a quicker reduction of the monetary stimulus. The Copom emphasizes that its view will also depend on the evolution of economic activity, the balance of risks, and how these factors affect inflation projections. 21. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.
br	copom_minutes_20190508.txt
br	copom_minutes_20181212.txt
br	copom_minutes_20220316.txt	1. Regarding the global outlook, the environment has deteriorated significantly. The conflict between Russia and Ukraine has led to a strong tightening in financial conditions and higher uncertainty surrounding the global economic outlook. In particular, the supply shock resulting from the conflict has the potential of increasing inflationary pressures, which had already been rising both in emerging and advanced economies. Since the previous meeting, most commodities have registered strong price increases, particularly the energy ones. 2. The reorganization of global production chains, with the creation of redundancies in production and the supply of inputs, as well as changes in the management of inventories of goods (in the sense of an increased level of inventories), was further propelled by the conflict in Europe and sanctions imposed to Russia. In Copom’s view, these developments might have long-term consequences and lead to more persistent inflationary pressures on global goods’ production. 3. Turning to the Brazilian economy, GDP growth in 2021Q4 came in higher than expected, producing a slightly larger statistical carry-over effect for 2022. In January, retail and services indicators evolved slightly better than expected, while industrial activity fell on the month. Labor market indicators continued to show consistent job recovery in 2021Q4 and January 2022. 4. For 2022, if, on the one hand, the rise in risk premia and the more intense tightening of financial conditions act to slow economic activity, on the other hand, Copom still considers that economic growth tends to benefit from the performance of agriculture and livestock, albeit with lower volumes than projected in the previous meeting, and from the remaining effects of the normalization process of the economy, particularly in the services sector and in the labor market. 5. Consumer inflation remains high, with increases spread among several components, and continues to be more persistent than anticipated. The increase of industrial prices has not slowed down and should persist in the short term, while services inflation accelerated even further. Recent readings were higher than expected and the surprise came in both the more volatile components and on items associated with core inflation. 6. The various measures of underlying inflation are above the range compatible with meeting the inflation target. Inflation expectations for 2022 and 2023 collected by the Focus survey are around 6.4% and 3.7%, respectively. 7. The Copom's inflation projections in its reference scenario, with interest rate path extracted from the Focus survey and exchange rate starting at USD/BRL 5.052 and evolving according to the purchasing power parity (PPP), stand around 7.1% for 2022 and 3.4% for 2023. This scenario assumes a path for the Selic rate that rises to 12.75% in 2022 and declines to 8.75% during 2023. In this scenario, inflation projections for administered prices are 9.5% for 2022 and 5.9% for 2023. The energy flag is assumed to be “yellow” in December of 2022 and 2023. 8. Given the recent volatility and the impact on its inflation projections due to the usual assumption for the oil price in USD3, the Committee has also decided to adopt, at this moment, an alternative scenario. This scenario, considered of higher probability, assumes that oil prices follow approximately the futures market curve until the end of 2022, ending the year at USD 100/barrel, and then start increasing 2% per year in January 2023. In this scenario, Copom’s inflation projections stand at 6.3% for 2022 and 3.1% for 2023. 9. The Copom’s scenarios for inflation encompass risk factors in both directions. 10. On the one hand, a possible reversion, even if partial, of the increase in the prices of international commodities measured in local currency would produce a lower-than-projected inflation in its scenarios. 11. On the other hand, fiscal policies that imply additional impulses to aggregate demand or deteriorate the future fiscal path may have a negative impact on prices of important financial assets as well as pressure the country’s risk premia. 12. In spite of the more favorable public accounts data, the Committee assesses that the uncertainties regarding the fiscal framework maintain elevated the risk of deanchoring inflation expectations but considers that this risk is being partially incorporated in the inflation expectations and asset prices used in its models. The Committee maintains the assessment of an upward asymmetry in the balance of risks. 13. Uncertainties regarding the future of the current fiscal framework result in increased risk premia and raise the risk of deanchoring inflation expectations. This implies assigning greater probability to alternative scenarios that consider higher neutral interest rates. This movement is already seen, to some extent, in the longer-term inflation expectations extracted from the Focus survey, as well as in the risk premia of several domestic assets. The Committee reiterates that the process of reforms and necessary adjustments in the Brazilian economy is essential for sustainable economic growth. Weaknesses in the structural reform effort and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 14. The conflict in Europe adds further uncertainty and volatility to the prospective scenario and imposes a relevant supply shock in several commodities. The Committee considered that the best practice recommends that monetary policy react to the second-round effects of this type of shock, as this practice takes into account the usual lags in the effects of monetary policy. 15. Copom specifically evaluated the impact on its projections of the assumption for the path of oil prices. In its usual hypothesis, the price per barrel starts from values around USD 118 in March and rises to around USD 121 by the end of 2023, i.e., extrapolating for the entire relevant horizon of monetary policy the oil price resulting from a particularly unusual global situation. The Committee noted that the current environment of high uncertainty and volatility demands serenity for the evaluation of the long-term impacts of the current shock, and therefore, decided to compare this assumption with the prices of oil future contracts negotiated in international markets as well as projections from the energy sector's agencies. The Committee observed that both converged to a price per barrel below USD 100 by the end of 2022. Copom then concluded that it would be appropriate to keep the usual assumption in the reference scenario, but to assume as more likely a scenario with an alternative assumption for the path of oil prices until the end of 2022. As of 2023, the Committee decided to stick to its more conservative assumptions. The Committee considers that the disclosure of an alternative scenario is particularly useful and informative in a highly uncertain environment. 16. Next, Copom discussed the implementation of monetary policy, considering the relative probabilities of the scenarios evaluated, as well as the balance of risks for inflation. Considering the greater weight assigned to the scenario with an alternative assumption for oil, the inflation projections are above the upper limit of the target tolerance band for 2022, and around the target for 2023. 17. As for the balance of risks, the Committee maintains the upward bias for the projections of its scenarios. Hence, considering this bias due to asymmetric risks, Copom evaluated that its projections are above the upper limit of the target tolerance band for 2022 and still around the target for 2023. Considering these results and the Committee's evaluation regarding the probability of each scenario, Copom considered that, at this moment, a monetary tightening cycle similar to the one used in its scenarios is the most adequate. 18. The increase of at least 0.75 p.p. in the projected interest rate cycle over the entire relevant horizon, since the previous Copom meeting, weighed in the Committee's assessment. The projected interest rate path implies a significantly restrictive monetary policy stance, which will mainly impact inflation for 2023, and is compatible with tackling second-round effects of the current supply shock. However, should the prospective scenario prove to be closer to that observed in the reference scenario, the Committee believes that this cycle should be even more restrictive. 19. Next, Copom assessed the appropriate pace of interest rate hikes. For such, it analyzed its inflation projections using simulations with monetary policy paths with different terminal rates, adjustment paces, and duration of monetary tightening. Given the volatility and uncertainty of the current environment, particularly in the global scenario, the Committee opted for a timelier interest rate trajectory than that embedded in its scenarios. This preference expresses caution regarding the probabilities awarded to its scenarios and the measurement of second-round effects, as well as its commitment to the convergence of inflation and expectations to its targets over the relevant horizon. 20. Based on these results, Copom members discussed the most appropriate strategy. The Committee concluded that a further adjustment of 1.00 percentage point, followed by an additional adjustment at the same pace, is the most appropriate strategy to achieve sufficient monetary tightening and to ensure inflation convergence over the relevant horizon, as well as the anchoring of long-term expectations. However, the Committee recognizes the challenging scenario for the convergence of inflation to its targets and reinforces that it will be ready to adjust the size of the monetary tightening cycle, should the scenario evolve unfavorably. 21. Taking into account the assessed scenarios, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 1.00 p.p. to 11.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target throughout the relevant horizon for monetary policy, which includes 2022 and, mainly, 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 22. The Committee considers that, given its inflation projections and the risk of a deanchoring of long-term expectations, it is appropriate to continue advancing in the process of monetary tightening significantly into an even more restrictive territory. 23. The Committee’s actions aim at curbing the second-round effects of the current supply shock in several commodities, which appear in inflation in a lagged manner. The current projections indicate that the interest rate cycle in its scenarios is sufficient for inflation convergence to levels around the target over the relevant horizon. The Copom judges that the moment requires serenity to assess the size and duration of the current shocks. If those shocks prove to be more persistent or larger than anticipated, the Committee will be ready to adjust the size of the monetary tightening cycle. The Committee emphasizes that it will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate. 24. For the next meeting, the Committee foresees another adjustment of the same magnitude. The Copom emphasizes that its future policy steps could be adjusted to ensure the convergence of inflation towards its targets and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 25. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.
br	copom_minutes_20220921.txt	1. The global environment remains adverse and volatile, with continued downward revisions on prospective growth in the major economies, especially in China. The data released since the previous Copom meeting reinforce the view that the U.S. labor market, as well as in other advanced economies, remains heated. However, the reversal of countercyclical policies in major economies, the persistence of the war in Ukraine with its consequences on natural gas supplies to Europe, and the continuation of the Covid-19 policy in China reinforce a prospect of a slowdown in global growth in the coming quarters. 2. The inflationary environment remains challenging. There is an incipient normalization in supply chains and an accommodation in the prices of major commodities in the recent period, which should lead to a moderation in global goods-related inflationary pressures. On the other hand, the low degree of slack in the labor market in these economies suggests that inflationary pressures in the sector of services might take long to dissipate. 3. The process of normalization of monetary policy in advanced economies continues towards contractionary rates in a synchronized way across countries, impacting economic growth expectations, and raising the risk of abrupt repricing movements in the markets. The Committee continues to monitor the risks related to the global slowdown and the increase in risk aversion in a highly pressured inflationary environment. 4. As for the domestic outlook, second quarter GDP came stronger than expected. Robust growth was observed in both consumption and investment. Moreover, the set of indicators released since the previous Copom meeting still suggests that the economy kept growing at the margin, albeit more moderately. Besides, the labor market continued to expand, although not completely reverting the real income decline observed in recent quarters. 5. Despite the recent reduction in prices of more volatile items and the impacts of tax measures, consumer inflation remains high. The recent releases have been strongly influenced by the reduction in administered prices, due to both the decrease in taxes and, to a lesser extent, the drop in international fuel prices. In addition, items related to industrial goods, reflecting the decrease in producer prices and the reduction of pressures in global value chains, also showed an incipient decline. However, the inflation of the components more sensitive to the economic cycle and the monetary policy, which present greater inflationary inertia, remain above the range compatible with meeting the inflation target. Inflation expectations for 2022, 2023, and 2024 collected by the Focus survey are around 6.0%, 5.0%, and 3.5%, respectively. 6. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.202 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “green” in December 2022, and “yellow” in December 2023 and 2024. In this scenario, Copom’s inflation projections stand at 5.8% for 2022, 4.6% for 2023, and 2.8% for 2024. Inflation projections for administered prices are -4.0% for 2022, 9.3% for 2023, and 3.7% for 2024. The Committee decided again to emphasize the six-quarter-ahead horizon, which reflects the relevant horizon, mitigates the primary effects from the tax changes but incorporates their second-round effects. On this horizon, which refers to the first quarter of 2024, the twelve-month inflation projection stands at 3.5%. The Committee judges that the uncertainty in its assumptions and projections is higher than usual. 7. Given the persistence of the inflationary process and the rise in inflation projections in several economies, the Committee assesses that the risk of a sharper deceleration in global economic activity has increased. This perception is reinforced by the monetary policy responses required to ensure the reanchoring of inflation, as well as the determination present in the communication from major central banks to reduce inflationary pressures. 8. The Committee assesses that a more tightening global monetary policy stance would have a disinflationary impact in Brazil in the medium term, as it leads to a widening of the global gap and less pressure on the prices of commodity and goods in general. However, it points out that the possible impacts of such repricing on assets in the short term add uncertainty about the effect on Brazilian inflation. 9. Measures of the degree of slack in the economy have great uncertainty. Currently, the analysis of some activity indicators, especially in the labor market, has led to the discussion if the output gap is narrower than that currently used by Copom in its reference scenario. In an alternative exercise assuming that the output gap would be at zero in the third quarter of 2022, inflation projections would be 4.9% and 3.0% for 2023 and 2024, respectively. 10. The Committee discussed the transmission channels and the effect of monetary policy on activity. Copom assessed that the pass-through of the Selic rate to the final rates of different types of credit has occurred as expected, although new corporate credit remain more robust than expected. The Committee continues to evaluate that a large part of the impact of monetary policy is still to be observed, both in economic activity and inflation, and that there was no substantial change in the transmission channels of monetary policy. 11. The Committee discussed the pace of disinflation of services and how inflation of less volatile items would behave in the coming quarters. It evaluated that there are several factors that may affect the path of services inflation, among them the drop in current inflation itself, which reduces the inertial effect on these items, and the more positive projections for economic activity, which raises the risk of more persistent pressures in this segment. In this regard, the Committee believes that continued monitoring of these factors is necessary to assess whether the maintenance of interest rate rates for a sufficiently long period will be enough to ensure inflation convergence. 12. In the domestic scenario, Copom believes that the permanent increase in spending and the uncertainty about its trajectory from next year on may increase the country's risk premia and inflation expectations as they put pressure on aggregate demand and worsen the fiscal path expectations. The Committee reiterates that there are several channels by which fiscal policy may affect inflation, including its effect on activity, asset prices, degree of uncertainty in the economy, and inflation expectations. 13. The Committee discussed the movements in inflation expectations in the Focus survey since the August Copom meeting. There has been a drop for 2023, but much of the movement observed is in items related to administered prices, possibly due to uncertainty about the tax recomposition of federal taxes. However, the median of inflation expectations for 2024 rose since the previous Copom meeting, even though the average has been more stable. Some members of the Committee emphasized that there was an increase in longer-term expectations in much of the emerging countries, reflecting the magnitude and persistence of the global shocks still underway. Finally, all members agree that it is the monetary authority's primary and fundamental role to conduct a monetary policy consistent with the anchoring of longer-term expectations, continuously strengthening its credibility, and reducing the future disinflationary cost. 14. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; (ii) the uncertainty about the country's future fiscal framework and additional fiscal stimuli that support aggregate demand, partially incorporated in inflation expectations and asset prices; and (iii) an output gap tighter than the currently adopted by the Committee in its reference scenario, especially in the labor market. Among the downside risks, it should be noted (i) an additional reduction in the prices of international commodities measured in local currency; (ii) a greater than projected deceleration of global economic activity; and (iii) the continuity of tax cuts assumed to be reversed in 2023. The Committee assesses that the still uncertain and volatile current scenario requires serenity when evaluating risks. 15. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for prospective inflation. 16. The twelve-month inflation projection for the first quarter of 2024, in the scenario using the interest rate trajectory extracted from the Focus survey, remains consistent with the strategy of inflation convergence to around the target over the relevant horizon. Moreover, the Committee continues to consider that inflation projection for 2024 is also around the target. This assessment reflects the lower-than-normal visibility of the prospective scenario, which increases the uncertainty of the specific projections communicated by the Committee over longer horizons. 17. The Committee decided again to emphasize the six-quarter-ahead horizon for its projections, and stresses that this decision is conditional on the temporary nature of the taxes. Copom anticipates that, if the alternative scenario of maintaining tax exemption on fuels in 2023 materialize, it will again emphasize horizons that include the first quarter of 2023. However, it assesses that there will be no relevant impacts on the conduct of monetary policy since the primary effects of such measures are already being disregarded. 18. Copom opened the discussion by evaluating the adjustment cycle carried out up to this meeting. It was emphasized that the current monetary tightening cycle has been quite intense and timely and that, due to the long and variable monetary policy lags, much of the expected contractionary effect and its impact on current inflation are still to be seen. These impacts should become clearer in the activity indicators throughout the second half of the year, but the Committee anticipates that measures to sustain aggregate demand hinder a more precise evaluation about the stage of the economic cycle and the impacts of monetary policy. 19. Copom then debated the monetary policy options for this meeting. The options to raise the base interest rates by 0.25 p.p. and to maintain it were widely debated. On the one hand, the additional interest rate increase would reinforce the vigilance stance and reflect the observation of a stronger than expected activity. On the other hand, caution and the need to evaluate, over time, the cumulative effects to be observed of the intense and timely monetary policy cycle already undertaken would be in favor of the maintenance. Therefore, most of the Committee members assessed that, given the data released, projections, inflation expectations, the balance of risks, and the lags of the effects of the monetary policy already in significantly contractionary territory, it was appropriate to maintain the interest rate at the level of 13.75% p.a. The Committee reinforced that it is necessary to remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation. 20. Two Committee members voted for a residual adjustment of 0.25 p.p on the Selic rate. These members argued that the additional increase would strengthen the Committee’s message of commitment to its strategy, given the rise in inflation expectations and the projection in the reference scenario for 2024, in an environment of uncertainty about the level of the output gap and the dynamics of activity. These members consider that the upside risks listed in the balance of risks may have longer-lasting impacts if they materialize, suggesting additional caution in assessing the reference scenario projections for the year 2024. 21. The Committee unanimously emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee emphasizes that it will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 22. Considering the assessed scenarios, the balance of risks, and the broad array of available information, the Copom decided to maintain the Selic rate at 13.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks and is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023 and, to a lesser extent, 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 23. The Committee will remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee reinforces that future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 24. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza. The following members voted for a residual adjustment of 0.25 p.p: Fernanda Magalhães Rumenos Guardado and Renato Dias de Brito Gomes.
br	copom_minutes_20200617.txt
br	copom_minutes_20220504.txt	1. The global environment has deteriorated further. Inflationary pressures arising from the global recovery after the pandemic period have intensified due to the increase of commodity prices in 2022 and, more recently, by the new wave of Covid-19 in China, which might potentially extend even further the process of normalization in the supply of industrial inputs. The reorganization of global production chains, already fueled by the war in Ukraine, is expected to intensify, with the search for a greater regional arrangement of the supply of inputs. In Copom’s view, these developments might have long-term consequences and lead to more persistent inflationary pressures on global production of goods. 2. Central banks in developed and emerging countries have adopted a more contractionary stance against increased inflation, although, in most of these economies, current interest rates are still at levels evaluated as expansionary. Because of the potential persistence of the inflationary pressure, the repricing of monetary policy in advanced countries has impacted financial conditions in emerging countries. The Committee has also discussed the growing risks involving a global deceleration in a highly pressured inflationary environment. 3. Turning to the Brazilian economy, the set of indicators released since the previous Copom meeting suggests a rate of growth in line with the Committee’s expectations. The labor market is still on a recovery path, and the latest trade and industry indicators have improved. 4. Consumer inflation remains high, with increases spread among several components, and continues to be more persistent than anticipated. Whereas inflation of services and industrial goods are still high, the recent shocks have led to a strong increase in the components associated with food and fuels. Recent readings were higher than expected, and the surprise came on both the more volatile components and the items associated with core inflation. As for the more volatile components, the increase of gasoline prices is still noteworthy, with greater and faster impact than anticipated. The inflation of the components more sensitive to the economic cycle and the monetary policy continues elevated, and the various measures of core inflation are above the range compatible with meeting the inflation target. Inflation expectations for 2022 and 2023 collected by the Focus survey are around 7.9% and 4.1%, respectively. 5. In the reference scenario, the interest rate path is extracted from the Focus survey (the Selic rate rises to 13.25% p.a. in 2022 and decreases to 9.25% p.a. in 2023) and the exchange rate starts at USD/BRL 4.952 and evolves according to the purchasing power parity (PPP). The Committee decided to keep the assumption that oil prices follow approximately the futures market curve until the end of 2022, ending the year at USD 100/barrel, and then start increasing 2% per year in January 2023. The energy flag is assumed to be “yellow” in December of 2022 and 2023. In this scenario, Copom’s inflation projections stand at 7.3% for 2022 and 3.4% for 2023. Inflation projections for administered prices are 6.4% for 2022 and 5.7% for 2023. The Committee judges that the uncertainty in its assumptions and projections is higher than usual. 6. The Committee opened its debate about the risks regarding its projections by discussing some of the likely explanations for the difference between the projection in its reference scenario and the analysts’ projections. Some members emphasized that high current inflation has contaminated longer-term expectations beyond what was expected. Moreover, some additional likely explanations have been discussed through the analysis of alternative scenarios. Firstly, Copom analyzed the impact of a slower reversion in industrial goods inflation, due to successive shocks on global production chains. In addition, Copom also observed that different assumptions about the neutral interest rate have an impact on its projections, albeit modest at the relevant horizon. Finally, inflationary impacts stemming from different assumptions about the convergence between the prices of oil and its by-products have also seemed relevant. 7. In what regards the global inflationary scenario, Copom assessed that inflationary pressures have intensified and are characterized by both a persistently high demand for goods (for example, in the U.S. economy) and supply shocks associated with the war in Ukraine and the Chinese policy to fight Covid-19. These factors might potentially generate persistent inflationary pressures in several economies, particularly in those countries with more lagged normalization processes of fiscal and monetary policies. 8. Furthermore, the Committee evaluated that there is still high uncertainty about the prospective trajectory of commodity prices in local currency, because of the war in Ukraine and the economic recovery in the post-pandemic period. Copom assesses that there is a possibility of reversion, even if partial, of the increase in international commodities measured in local currency. 9. The Committee has debated the fiscal risk and how it affects the conduct of monetary policy. Uncertainties regarding the future of the current fiscal framework result in increased risk premia and raises the risk of a deanchoring of inflation expectations. This movement is already seen, to some extent, and is already partially incorporated in the longer-term inflation expectations extracted from the Focus survey, as well as in the prices of several domestic assets. The Committee emphasized that the appropriate level of monetary tightening is also dependent on the prevailing fiscal framework. Weaknesses in the structural reform effort, as well as permanent changes to the fiscal consolidation process could result in an increase in the neutral interest rate. 10. The Committee evaluated the risks around the reference scenario for economic growth in 2022 and 2023. The Committee highlighted that economic growth came in line with expectations, but the tightening of financial conditions brings a risk of greater-than-anticipated deceleration in the quarters ahead, when its impacts tend to be more evident. 11. The Committee emphasizes that risks to its inflation scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; and (ii) an increase in the risk premium due to the uncertainty about the country's future fiscal framework, partially incorporated in inflation expectations and asset prices. Among the downside risks, it should be noted (i) a possible reversion, even if partial, of the increase in the price of international commodities measured in local currency; and (ii) a greater deceleration of economic activity than projected. The Committee assesses that the uncertain and volatile current scenario requires serenity when evaluating the risks. 12. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 13. Copom opened the discussion by evaluating the adjustment cycle carried out up to this meeting. It was emphasized that the current monetary tightening cycle was quite intense and timely and that, due to monetary policy lags, much of the expected contractionary effect and its impact on current inflation are still to be seen. 14. Still, Copom noted that an additional deterioration was observed in both the short-term inflationary dynamics and the longer-term projections, even though the scenario is characterized by higher than usual uncertainty and volatility. 15. Copom then debated the monetary policy options for this meeting. The Committee concluded that a further adjustment of 1.00 percentage point was appropriate. 16. Copom members then discussed how to signal the future monetary policy. The Committee opted to signal, as likely, an extension of the cycle, with an adjustment of lower magnitude in the next meeting. This strategy was deemed more appropriate to ensure the convergence of inflation over the relevant projection horizon, as well as the anchoring of longer-term inflation expectations, while reflects the already implemented monetary tightening, reinforces the cautious monetary policy stance and emphasizes the uncertain scenario. 17. Taking into account the assessed scenarios, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 1.00 p.p. to 12.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target throughout the relevant horizon for monetary policy, which includes 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 18. The Committee considers that, given its inflation projections and the risk of a deanchoring of long-term expectations, it is appropriate to continue advancing in the process of monetary tightening significantly into an even more restrictive territory. The Committee emphasizes that it will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate. 19. For its next meeting, the Committee foresees as likely an extension of the cycle, with an adjustment of lower magnitude. The Committee stresses that the heightened uncertainty of the current scenario, the advanced stage of the current monetary policy cycle, and its impacts yet to be observed require additional caution in its actions. The Copom emphasizes that its future policy steps could be adjusted to ensure the convergence of inflation towards its targets and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 20. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza and Renato Dias de Brito Gomes.
br	copom_minutes_20190731.txt
br	copom_minutes_20230503.txt	1. The global environment remains challenging. The episodes involving banks abroad have increased the uncertainty, but with limited contagion on financial conditions so far, requiring constant monitoring. The impact of these episodes on financial conditions and consequently on global growth is still uncertain but has a negative bias. Major economies have emphasized the principle of separation of objectives and instruments in the conduct of monetary and macroprudential policies, despite incorporating the impacts on activity in their scenarios. 2. At the same time, the central banks of major economies remain committed to bringing inflation back to its targets, in an environment in which inflation has been resilient. Recent inflation readings from several countries point to some stabilization of core inflation at levels above their targets and reinforce the persistent nature of the current inflationary process. Furthermore, most monetary authorities signal a prolonged period of high interest rates necessary to fight inflationary pressures, which calls for greater caution in the conduct of economic policies also by emerging countries. 3. Turning to the Brazilian economy, the Committee's expected scenario of gradual growth slowdown is still corroborated by the recent set of indicators. Some moderation is observed in the coincident indicators of activity, as well as a slowdown in the credit market at the margin. The labor market, which surprised positively throughout 2022, has shown resilience, with a net increase in job creation and relative stability in the unemployment rate. 4. Consumer inflation remains high. The inflation of the components more sensitive to the economic cycle and to the monetary policy, which present greater inflationary inertia, remains above the range compatible with meeting the inflation target. Inflation expectations for 2023 and 2024 collected by the Focus survey have increased marginally and are around 6.1% and 4.2%, respectively. 5. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.052 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “green” in December 2023 and 2024. In this scenario, Copom’s inflation projections stand at 5.8% for 2023 and 3.6% for 2024. Inflation projections for administered prices are 10.8% for 2023 and 5.2% for 2024. 6. The Committee analyzed an alternative scenario with stable interest rates over the entire relevant horizon. In such scenario, inflation projections stand at 5.7% for 2023 and 2.9% for 2024. 7. The neutral real interest rate is the rate in which, in the absence of impact from other factors, the inflation rate remains stable, and the output grows according to its potential, reflecting productivity gains and changes in the structural fundamentals of the economy. In assessing the factors that could lead to unfold an alternative scenario characterized by a higher neutral interest rate, emphasis was placed on the possible adoption of expansionary parafiscal policies, which can increase the neutral rate and reduce the power of monetary policy, as previously remarked by the Committee. Still regarding the debate about the current neutral interest rate in the economy, some members raised an additional aspect, related to the recent economic data set. These members pointed out that a scenario marked by a possible rise in neutral interest rates in major economies, resilience in Brazilian activity, and a slow disinflationary process could be compatible with a higher measure of neutral rate than that assumed by the Committee. Under this argument, therefore, the current monetary tightening would lead to a lower contractionary impact than that implicit in the Copom's scenarios. However, most of the committee members judged that this interpretation still seems premature and needs further corroboration by data. 8. Regarding the global outlook, the low degree of labor market slack in some economies and a persistently high current inflation and widespread in the services sector suggest that inflationary pressures should last longer. In this context, reducing inflationary pressures continues to require the commitment and determination of central banks to control inflation by maintaining the tightening of financial conditions for a longer period. Such determination, with a likely impact upon asset prices in the short term, coupled with a credit slowdown in major economies, contributes to a more credible and lasting global disinflationary process. 9. Despite the limited contagion from the recent financial instability in the US banking sector, a further tightening of credit conditions is observed in that country. Thus, despite the reduction in the likelihood of a disruption in the credit market, a scenario with a more restricted credit supply and, consequently, lower economic growth, prevails. The Committee will continue to monitor this situation, analyzing possible transmission channels, although the direct impact on the domestic financial system is deemed limited. The Committee reinforces that the best contribution of monetary policy is to fight inflationary pressures and smooth economic fluctuations, and it emphasizes, once again, the separation of instruments between the objectives of inflation control and financial stability. 10. Brazilian activity data point to a moderate pace of growth at the margin, with emphasis on the support given by consumption, on the demand side, and by the agricultural and livestock sector, on the supply side. Some members reminded that the methodological changes in monthly activity surveys may increase uncertainty in GDP projections and in the current assessment of activity. Copom anticipates a more vigorous GDP growth in the release of the first quarter of 2023, especially due to agricultural production, followed by moderation in economic activity in an environment marked by resilience in the labor market. In addition, formal employment data continued to reveal increase of job creation in the most recent period. Some members noted that there is a movement towards a partial recomposition of recent losses in real wages. This movement is expected and has been accompanied by a deceleration in nominal gains, which is expected to intensify ahead. Finally, it was noted that the economic growth outlook has not changed significantly in the recent period. 11. The Committee believes that the disinflation dynamics continues to be characterized by a process with two distinct stages. In the first stage, already completed, the speed of disinflation was greater, with a greater effect on administered prices and an indirect effect on market prices through less inertia. In the second stage, which has been currently observed, the speed of disinflation is slower, and core inflation – which is more affected by the aggregate demand and the interest rate policy – declines at a slower pace, responding to the output gap and future inflation expectations. The most recent inflationary data support the view of a slower disinflation process, in line with the view of an inflation driven by excess of demand, mostly in the services segment. The Committee reaffirms that the disinflation process at its current stage demands serenity and patience in the conduct of monetary policy to ensure the convergence of inflation to its targets. 12. Still in the discussion about inflationary behavior, the recent benign behavior of wholesale prices was emphasized, both for food and industrial goods, in line with the Committee's view. In addition, due to a comfortable water scenario for 2023, the green energy flag is assumed for December. Moreover, seeking to avoid an excessive impact of the assumption about energy tariff flags, which are inherently affected by a lot of uncertainty for longer horizons, on inflation projections and with possible impacts on the conduct of monetary policy, it was decided to adopt the neutral flag, i.e., green flag for December 2024, also in line with the view of most analysts outlined in the pre-Copom questionnaire. In terms of the trajectory of consumer inflation over 2023, it should be noted that a relevant drop is expected in the twelve-month inflation during this second quarter, due to the base effect of the previous year. In the second half of 2023, as the twelve-month inflation no longer includes the effects of the tax measures that reduced the price level in the third quarter of 2022 and the effects of this year's tax measures will still be included, this inflation indicator will rise. Copom, therefore, emphasizes that such behavior does not reflect the underlying inflationary dynamics, nor does it change the view on future prospects. 13. Inflation expectations remain deanchored from the targets set by the National Monetary Council, having slightly deteriorated at the margin. The Committee is following this movement with concern and continues to assess that deanchored expectations raise the cost of bringing inflation back to the target. It was emphasized again that the behavior of expectations is a fundamental aspect of the inflationary process since it serves as a guide for present and future prices and wages setting. Thus, as expectations rise, there is a greater rise in prices in the current period and the inflationary process is fueled by these expectations. It was also highlighted that the anchoring of expectations is a key factor for price stability. In this context, the Committee reinforces that decisions that induce to the reanchoring of expectations and that raise confidence in the inflation targets would contribute to a faster and less costly disinflation process. 14. The domestic credit granting scenario seems compatible with the current stage of the monetary policy cycle, despite the persistence of a stronger decrease in the supply of credit in specific modalities. The Committee anticipates a moderation in credit granting over the next few months, but in line with what has been observed in previous monetary policy tightening cycles. The Committee believes that the BCB has the appropriate and necessary liquidity instruments, associated with macroprudential policy, to deal with relevant frictions in the system, should they occur. 15. The Committee also discussed the impacts of the fiscal scenario on inflation and assesses that the presentation of the fiscal framework has reduced the uncertainty associated with extreme scenarios of public debt growth. The Committee will continue to monitor the processing and implementation of the fiscal framework presented by the government and under discussion in the National Congress. Copom again emphasized that there is no mechanical relationship between the convergence of inflation and the approval of the fiscal framework since the inflation path is conditional on the reaction of inflation expectations and financial conditions. The materialization of a scenario with a solid and credible fiscal framework may lead to a more benign disinflation process through its effect on the expectations channel, by reducing inflation expectations, uncertainty in the economy, the risk premium associated with domestic assets and, consequently, the Committee's projections. 16. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; (ii) the lingering uncertainty about the final fiscal framework to be approved by the National Congress and, more relevant for monetary policy, its impacts on the expected paths of the public debt and of inflation expectations, and on risky assets; and (iii) a larger or more persistent deanchoring of long-term inflation expectations. Among the downside risks, it should be noted (i) an additional reduction in the prices of international commodities measured in local currency; (ii) a greater than projected deceleration of global economic activity, particularly due to adverse conditions in the global financial system; and (iii) a slowdown in domestic credit granting larger than what would be compatible with the current stance of monetary policy. 17. On the one hand, the reinstatement of fuel taxes and, primarily, the presentation of a proposal for the fiscal framework have partly reduced the uncertainty arising from fiscal policy. On the other hand, the current scenario, characterized by a stage in which the disinflationary process tends to be slower in an environment of deanchored inflation expectations, requires further attention when conducting monetary policy. Copom emphasizes that there is no mechanical relationship between the convergence of inflation and the approval of the fiscal framework, and judges that the deanchoring of long-term inflation expectations raises the cost of the disinflation that is needed to reach the targets established by the National Monetary Council. In this scenario, Copom reaffirms its commitment to set monetary policy to meet the targets. 18. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 19. Copom started the debate by evaluating whether the previously outlined strategy of stable interest rates would be enough to ensure the convergence of inflation towards to its targets. To this end, the Committee has continued its process of analyzing the main determinants of the inflation path and how they have behaved in the most recent period. No significant change occurred in the prospective scenario for the output gap. As for services inflation and measures of core inflation, increased resilience and lower speed are observed in the recent releases, in line with the non-linear process already anticipated by Copom. In addition, inflation expectations remain deanchored, partially related to the questioning about a possible change in future inflation targets. 20. Copom's inflation projections have remained relatively stable since the previous meeting. Finally, in the balance of risks, besides the factors already mentioned, the Committee evaluates that the probability of the most extreme scenarios for the public debt trajectory has reduced, but also noted that there was no relevant change in the inflation projections since expectations did not change significantly. This behavior reinforces the understanding that there is no mechanical relationship between monetary policy and the fiscal framework. Copom emphasized that the conduct of monetary policy, at this moment, requires serenity and patience to incorporate the inherent delays in the inflation control through interest rates and, therefore, to reach the goals in the relevant monetary policy horizon. Therefore, the Committee assessed that the scenarios that could require a resumption of the monetary policy tightening cycle have become less likely. 21. Considering the assessed scenarios, the balance of risks, and the broad array of available information, Copom decided to maintain the Selic rate at 13.75% p.a. The Committee judges that this decision is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes the year of 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and fostering full employment. 22. Taking into account the uncertainty of the scenarios, the Committee remains vigilant, assessing if the strategy of maintaining the Selic rate for a long period will be enough to ensure the convergence of inflation. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee judges that the current scenario demands patience and serenity in the conduct of monetary policy. Copom emphasizes that, although a less likely scenario, it will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 23. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza, and Renato Dias de Brito Gomes.
br	copom_minutes_20200205.txt
br	copom_minutes_20190321.txt
br	copom_minutes_20211027.txt	1. Regarding the global outlook, the environment is becoming less favorable, reflecting the persistent inflation and the consequent central banks’ reaction. Growth in 2022 should be lower, with the reversal of fiscal stimuli and advance in the process of monetary policy normalization. This combination implies a more challenging scenario for emerging markets. 2. Turning to the Brazilian economy, recently released industrial output and trade indicators show negative and below-expected results. On the other hand, the services segments hardest hit by the pandemic continue on a robust recovery trajectory. The Committee maintained the expectation of a recovery in activity in the second half of the year, although less intense and more concentrated in the services sector. This reassessment reflects the impact of supply shortages of inputs in some productive chains, which should persist until 2022. 3. For 2022, if on the one hand the rise in risk premia and the tightening of financial conditions act stifling the economic activity, on the other Copom considers that economic growth will be benefited by three tailwinds: the continued recovery of the labor market and the services sector; the performance of sectors less dependent on the business cycles – such as agriculture and livestock and the extractive industry; and the remaining effects of the normalization of the economy as the health crisis recedes. 4. Consumer inflation remains high and has been more persistent than anticipated. Price increases are more widespread and also include items more associated with core inflation. The increase of industrial prices has not slowed down and should persist in the short term, whereas services inflation accelerated due to the gradual normalization in the sector’s activity, as expected. Besides these developments, since the previous Copom meeting there has been a substantial increase in international energy commodity prices, whose inflationary impact is amplified by the BRL depreciation. Combined, they are the preponderant factor for the increase in the Committee's inflation projections for both 2021 and 2022. 5. The various measures of core inflation are above the range compatible with meeting the inflation target. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 9.0%, 4.4%, and 3.3%, respectively. 6. Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at USD/BRL 5.602 and evolving according to the purchase power parity (PPP), stand around 9.5% for 2021, 4.1% for 2022, and 3.1% for 2023. This scenario assumes a path for the Selic rate that rises to 8.75% p.a. in 2021 and to 9.75% p.a. in 2022, ending the year at 9.50% p.a., and drops to 7.00% p.a. during 2023. In this scenario, inflation projections for administered prices are 17.1% for 2021, 5.2% for 2022, and 5.1% for 2023. The energy flag is assumed to be “water scarcity” in December 2021 and “red level 2” in December of 2022 and 2023. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, a possible reversion, even if partial, of the recent increase in the price of international commoditiesmeasured in local currency would produce a lower-than-projected inflation in the baseline scenario. 9. On the other hand, further extensions of fiscal policy responses to the pandemic that increase aggregate demand and deteriorate the fiscal path may pressure the country's risk premium. 10. Despite the more positive public accounts data, the Committee assesses that recent questioning regarding the fiscal framework increased the risk of deanchoring inflation expectations, raising the upward asymmetry in the balance of risks. This implies a higher probability of inflation paths above the one projected under the baseline scenario. 11. The public accounts have performed better than expected. Assuming the current fiscal framework is maintained, in particular the control of spending growth, Copom's projections foresee a falling trajectory for the public debt as a percentage of GDP. However, between Copom's meetings, relevant questionings arose regarding the future of the current fiscal framework, resulting in higher risk premia. These questionings have also raised the risk of deanchoring inflation expectations, increasing the upward asymmetry in the balance of risks for the conduct of monetary policy. This implies assigning greater probability to alternative scenarios that consider higher neutral interest rates. 12. The Committee reiterates that the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic growth. Weaknesses in the structural reform effort and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 13. Next, Copom discussed the implementation of monetary policy, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, which uses the interest rate path extracted from the Focus survey and the exchange rate at purchase power parity, the inflation projections are above the target for 2022 and around the target for 2023. The Committee pondered that the asymmetry in the balance of risks resulting from the developments in the fiscal scenario implies an increase in the upward risk to its baseline scenario projections and assessed that this upside bias is now larger than previously considered. Therefore, the Committee concluded that the appropriate degree of monetary tightening is significantly more contractionary than that used in the baseline scenario. 14. In view of this, Copom assessed the appropriate pace of interest rate hikes. To this end, it analyzed the convergence of inflation to targets using simulations with different monetary policy paths under different alternative scenarios. The Committee pondered that, at this moment, shocks in BRL-denominated commodity prices already impact the 2022 projections, raising their volatility. Nevertheless, Copom understands that a process of deanchoring inflation expectations may cause high economic costs in the long term and thus decided to choose a pace of interest rate hikes compatible with the convergence of inflation to the target still in 2022. 15. The Committee also considered scenarios with adjustments greater than 1.50 p.p. The prevailing view, however, was that monetary policy tightening paths with 1.50 p.p. steps, considering different ending rates, are consistent with inflation converging to the target in 2022, even considering the current asymmetry of the balance of risks. 16. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 1.50 p.p. to 7.75% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to the targets over the relevant horizon for monetary policy, which includes 2022 and 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 17. The Committee considers that, given the deterioration of the balance of risks and the increase in its inflation projections, this pace is the most appropriate to guarantee inflation convergence to the targets at the relevant horizon. At this moment, the Copom’s baseline scenario and balance of risks indicate as appropriate to advance the process of monetary tightening even further into the restrictive territory. 18. For the next meeting, the Committee foresees another adjustment of the same magnitude. Copom emphasizes that its future policy steps could be adjusted to ensure the achievement of the inflation target and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 19. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Magalhães Rumenos Guardado, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.
br	copom_minutes_20220615.txt	1. The global environment has deteriorated further, marked by downward revisions on prospective global growth in an environment of strong and persistent inflationary pressures arising from the global recovery after the pandemic period. These pressures have intensified due to the increase of commodity prices in 2022 and, more recently, by the Covid-19 wave in China, further prolonging the process of normalization in the supply of industrial inputs. The reorganization of global production chains, already fueled by the war in Ukraine, is expected to intensify with the search for a greater regional arrangement of the supply of inputs. In Copom’s view, these developments might have long-term consequences and lead to more persistent inflationary pressures on global production of goods. 2. The growth of major economies has been revised down for 2022 and 2023 due to the expected reversal of the stimuli implemented during the long pandemic period, in particular by monetary policy action. Negative growth revisions were also noted for China, partially reflecting the zero-Covid policy adopted by that country. 3. Central banks in developed and emerging countries have adopted a more contractionary stance against increased inflation, although, in some of these economies, current interest rates are still at levels evaluated as expansionary. The repricing of monetary policy in advanced economies, the increase in risk aversion, and the change in the growth outlook have affected financial conditions in both advanced and emerging economies. The Committee has also discussed the growing risks involving a global deceleration in a highly pressured inflationary environment. 4. Turning to the Brazilian economy, the set of indicators released since the previous meeting suggests a growth rate above the Committee’s expectations. Indicators related to the labor market continue to recover and the release of the 2022Q1 GDP pointed to a higher-than-expected pace of activity, raising the statistical carry-over for this year. Household consumption continues to contribute positively, while, in 2022Q1, Gross Fixed Capital Formation contributed negatively. 5. Consumer inflation remains high, with increases spread among several components, and continues to be more persistent than anticipated. The inflation of services and of industrial goods remain high, and the recent shocks continue to cause a strong increase in food and fuel-related components. Recent readings were higher than expected and the surprise came in both the more volatile components and on items associated with core inflation. The inflation of the components most sensitive to the economic cycle and the monetary policy continues elevated, and the various measures of underlying inflation accelerated, standing above the range compatible with meeting the inflation target. Inflation expectations for 2022, 2023, and 2024 collected by the Focus survey are around 8.5%, 4.7%, and 3.25%, respectively. 6. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 4.902 and evolves according to the purchasing power parity (PPP). This scenario assumes a path for the Selic rate that ends 2022 at 13.25% p.a., falls to 10.0% in 2023 and 7.50% in 2024. The Committee decided to keep the assumption that oil prices follow approximately the futures market curve for the following six months, ending the year at USD 110/barrel, and then start increasing 2% per year in January 2023. Moreover, the energy flag is assumed to be “yellow” in December 2022, 2023, and 2024. In this scenario, Copom’s inflation projections stand at 8.8% for 2022, 4.0% for 2023, and 2.7% for 2024. Inflation projections for administered prices are 7.0% for 2022, 6.3% for 2023, and 3.3% for 2024. The projections based on the reference scenario do not incorporate the tax measures on fuels, energy, and telecom prices under the approval process. The Committee judges that the uncertainty in its assumptions and projections is higher than usual and has increased since the previous meeting. 7. The Committee assesses that the global inflationary scenario continues to be marked by inflationary pressures stemming from both persistently high demand for goods and supply shocks linked to the war in Ukraine and China's Covid-19 policy. The Committee further believes that recent policies restricting trade in agricultural products in commodity-producing countries, coupled with the effects of the war in Ukraine, bring additional risk to global inflationary pressures. In the Copom’s view, these developments might have long-term consequences and lead to more persistent inflationary pressures. 8. The Committee then discussed the growing risks involving a sharper global deceleration in a highly pressured inflationary environment. The Committee already anticipates a slowdown in global activity in the coming quarters, due to geopolitical tensions and the monetary policy tightening, as well as financial conditions underway in several central economies. The Committee believes that the global synchrony in the process of stimulus withdrawal introduces additional risks to markets and may boost its impact on the prospective scenario. 9. In this context of global deceleration, Copom considers a possible reversion, even if partial, of the increase in international commodities measured in local currency observed in recent quarters. 10. The Committee reinforces that uncertainty about the future of the country's fiscal framework and fiscal policies that support aggregate demand may bring an upside risk to the inflationary scenario and to inflation expectations. 11. The Committee believes that recent domestic activity data, which have prompted a positive revision to 2022 growth, still reflect, for the most part, the post-pandemic normalization process of the economy, both in the higher consumption of services and in the utilization of the excess savings observed over historical records, and the transitory fiscal stimulus provided in the first half of the year. The Committee assesses that activity should decelerate in the coming quarters when the lagged impacts of monetary policy will be more strongly felt. 12. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; and (ii) the uncertainty about the country's future fiscal framework and fiscal policies that support aggregate demand, partially incorporated in inflation expectations and asset prices. Among the downside risks, it should be noted (i) a possible reversion, even if partial, of the increase in the price of international commodities measured in local currency; and (ii) a greater deceleration of economic activity than projected. The Committee assessed that the tax measures under the approval process imply a sizable reduction in inflation in the current year, although they raise by a smaller magnitude inflation in the relevant horizon for monetary policy. The Committee assesses that the uncertain and volatile current scenario requires serenity when evaluating the risks. 13. Copom discussed the conduct of monetary policy, considering the set of projections analyzed, as well as the balance of risks for prospective inflation. 14. Copom opened the discussion by evaluating the adjustment cycle carried out up to this meeting. It was emphasized that the current monetary tightening cycle was quite intense and timely and that, due to monetary policy lags, much of the expected contractionary effect and its impact on current inflation are still to be seen. 15. Still, Copom observed deterioration in both the short-term inflationary dynamics and the longer-term projections, even though the scenario is surrounded by higher than usual uncertainty and volatility. 16. The Committee believes, based on the projections used and on its balance of risks, that the strategy required to bring the 4.0% projected inflation to around the target for the relevant horizon combines, on the one hand, a terminal interest rate above that used in the reference scenario and, on the other, the maintenance of the interest rate in significantly contractionary territory for a longer period than that used in the reference scenario. Thus, the strategy of convergence around the target requires a more contractionary interest rate than that used in the reference scenario for the entire relevant horizon. 17. Copom then debated the monetary policy options for this meeting. The Committee concluded that a further adjustment of 0.50 p.p. was appropriate in an environment of high uncertainty and the significantly contractionary stage of monetary policy, which, considering its lags, should affect the economy more strongly as of the second half of 2022. 18. The signaling for the next meeting was then discussed. Given the persistence of the recent shocks, the Committee evaluated that only the perspective of maintaining the Selic rate for a sufficiently long period would not assure, at this moment, the convergence of inflation around the target in the relevant horizon. The Committee then chose to signal a further adjustment, of equal or smaller magnitude. This strategy was deemed more appropriate to ensure the convergence of inflation over the relevant horizon, as well as the anchoring of longer-term inflation expectations, while reflecting the already implemented monetary tightening, reinforcing the cautious monetary policy stance, and emphasizing the uncertainty of the scenario. 19. Taking into account the assessed scenarios, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 0.50 p.p. to 13.25% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks and is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 20. The Committee considers that, given its inflation projections and the risk of a deanchoring of long-term expectations, it is appropriate to continue advancing in the process of monetary tightening significantly into even more restrictive territory. The Committee emphasizes that it will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate. 21. For its next meeting, the Committee foresees a new adjustment, of the same or lower magnitude. The Committee stresses that the growing uncertainty of the current scenario, coupled with the advanced stage of the current monetary policy cycle, and its impacts yet to be observed, require additional caution in its actions. The Copom emphasizes that its future policy steps could be adjusted to ensure the convergence of inflation towards its targets and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 22. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza, and Renato Dias de Brito Gomes.
br	copom_minutes_20200506.txt
br	copom_minutes_20230201.txt	1. The global environment continues to be marked by prospects of below-potential global growth for next year. The easing of the COVID policy in China, a milder winter in Europe, and the possibility of a gradual decline in the US growth soften the expected global economic slowdown for the coming quarters due to the tightening of financial conditions in major economies. 2. The inflationary environment remains challenging, but recent data suggest some moderation at the margin in several countries. There is a normalization in supply chains and an accommodation in the prices of major commodities in the recent period, leading to a moderation in goods-related inflationary pressures. Conversely, the low degree of labor market slack in some economies, associated with a high current inflation and a high degree of inflation diffusion, suggests that inflationary pressures on the services sector should last longer. 3. The process of normalization of monetary policy in advanced economies continues towards restrictive rates synchronized across countries, tightening financial conditions and impacting economic growth expectations. A long-lasting period of high interest rates is foreseen after the process of increasing interest rates, which calls for greater caution in the conduct of economic policies also by emerging economies 4. Regarding the Brazilian economy, the set of indicators released since the previous Copom meeting continues to be in line with the scenario of deceleration expected by the Committee. It was observed that confidence indicators dropped and industrial production, trade, and services indicators downturned. The labor market, which surprised positively throughout 2022, still shows signs of deceleration, with a decline in net hirings in New CAGED and some stability in the unemployment rate stemming from setbacks in the employed population and the workforce. 5. Notwithstanding the slowdown at the margin, consumer inflation remains high. The inflation of the components more sensitive to the economic cycle and the monetary policy, which present greater inflationary inertia, remain above the range compatible with meeting the inflation target, albeit showing some marginal moderation. Inflation expectations for 2023 and 2024 collected by the Focus survey are around 5.7% and 3.9%, respectively. 6. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.152 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “yellow” in December 2023 and 2024. In this scenario, Copom’s inflation projections stand at 5.6% for 2023 and 3.4% for 2024. Inflation projections for administered prices are 10.6% for 2023 and 5.0% for 2024. The Committee decided again to emphasize the six-quarter-ahead horizon. On this horizon, which refers to 2024Q3, the 12-month inflation projection stands at 3.6%. The Committee judges that the uncertainty in its assumptions and projections is higher than usual. 7. The Committee analyzed an alternative scenario with stable interest rates throughout the entire relevant horizon. In this scenario, Copom’s inflation projections stand at 5.5% for 2023, 3.1% for 2024Q3, and 2.8% for 2024. 8. The Committee evaluated different assumptions, parameters, and scenarios in its discussion of inflation projections. On this subject, some members evaluated the possibility of incorporating some increase in the neutral interest rate, towards the movement observed in longer-term inflation expectations extracted from the Focus survey. The Committee chose, at this point, to maintain the neutral interest rate at 4%, but evaluated alternative scenarios and identified that the impacts on its projections of an increase in the neutral rate grow over time and become more relevant as of the second half of 2024. 9. Copom assesses that the scenario for prospective global growth looks a little less challenging as a result of the change in China's COVID policy and of the mild winter in Europe. Some members emphasized that economic activity and labor market data remain relatively resilient in the US. In China, the adjustments in sanitary restrictions should lead to a cyclical recovery in demand and a reduction in the risks of supply disruptions. However, the Committee assesses that the Chinese long-term growth is expected to remain lower than observed in the pre-pandemic period, reflecting both the adjustments in the real estate sector and the worsened demographics expected in the coming years. In Europe, the milder winter has also reduced the likelihood of extreme scenarios in energy supply. In the US, economic activity data have been pointing to deceleration, but still in an environment of very pressured labor market. Despite these short-term developments, the Committee continues to assess that the commitment and determination of central banks to reduce inflationary pressures and anchor expectations consolidate a global scenario of tightening of financial conditions for a longer period, with rates at the end of the tightening cycle maintained for a sufficiently long period at contractionary levels, raising the risk of a more pronounced global deceleration. 10. The Committee continues to assess that the process of global disinflation, especially regarding core inflation indicators, is challenging and will possibly happen more slowly than usually observed, since inflation is widespread in the services segment. However, some members highlighted the deceleration in the measures of core inflation in several countries. 11. Data on economic activity in Brazil continues to indicate a more moderate pace of marginal growth and employment data suggest a loss of dynamism. Some members observed a movement towards partial recomposition of recent real wages losses, but judge that this movement is expected and is coupled with a deceleration in nominal gains that is expected to intensify ahead. The Committee will continue to monitor the labor market releases, continuously assessing the role of lagged inflation and labor market pressures on wage adjustments. The set of released data, including the drop in confidence indicators and the deceleration in credit grants, together with the lagged effects of monetary policy, reinforce the Committee's expectation of a slowdown in the pace of economic activity, which should worsen over the coming quarters. 12. The Committee noted with particular concern the deterioration in longer-term inflation expectations. Such deterioration may have happened for several reasons, among them a possible perception of the Banco Central do Brasil (BCB) leniency with the targets set by the National Monetary Council (CMN), an expansionary fiscal policy that pressures the aggregate demand over the projection horizon, or the possibility of changes in the inflation targets already set. 13. In the first case, the BCB reaffirms its commitment to conduct monetary policy to achieve the established targets and assesses that, once the deanchoring is observed, it is necessary to remain even more vigilant in the conduct of monetary policy to reanchor expectations and thus reduce the future cost of the disinflation. 14. In the second case, the Committee considers that demand stimuli should be assessed in view of the stage of the economic cycle and the degree of slack in the economy, with monetary policy being the macroeconomic adjustment variable used to mitigate any inflationary effects of the fiscal policy. 15. Finally, regarding the third case, the BCB conducts monetary policy based on the targets set by the CMN. In summary, more important than analyzing the motivations for the rise in expectations, the Committee emphasizes that it will act to ensure that inflation converges to the targets. 16. The Committee also discussed the impacts of the fiscal scenario on inflation. In this discussion, it was again emphasized that the net effect of the conduct of fiscal policy on inflation is very dependent on the prevailing macroeconomic and financial conditions. Thus, by analyzing the multiple channels, including the movement in financial conditions arising from future interest rates, and updating the assumptions for the fiscal path to incorporate the sanctioned budget for 2023, the Committee assesses that the scenario for activity has not changed significantly. Some members have noted that the median projections of the Pre-Copom Questionnaire (PCQ) and the Focus survey for the 2023 primary deficit are much lower than that estimated in the federal budget, possibly incorporating the fiscal package announced by the Ministry of Finance. Copom sustained its usual governance of incorporating the policies already sanctioned by law, but it acknowledges that the implementation of the proposed fiscal package could reduce the upside inflation risk. 17. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; (ii) the still heightened uncertainty about the country's future fiscal framework and fiscal stimuli that support aggregate demand, partially incorporated in inflation expectations and asset prices; and (iii) an output gap tighter than the one currently adopted by the Committee in its reference scenario, especially in the labor market. Among the downside risks, it should be noted (i) an additional reduction in the prices of international commodities measured in local currency; (ii) a greater than projected deceleration of global economic activity; and (iii) the continuity of tax cuts assumed to be reversed in 2023. 18. The current scenario, particularly uncertain on the fiscal side and with inflation expectations drifting away from the inflation target on longer horizons, calls for greater attention in the conduct of monetary policy. The Committee judges that this scenario raises the cost of the disinflation that is needed to reach the targets established by the CMN. In this scenario, Copom reaffirms its commitment to set monetary policy to meet the targets. 19. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 20. The Committee decided again to emphasize the six-quarter-ahead horizon for its projections but anticipates that, for the next quarter, it will resume adopting the usual horizon, according to the calendar years, since the six-quarter ahead horizon will coincide with the calendar year of 2024, and then there will be no direct effect of the tax changes in the usual horizon. 21. The Committee began its debate by evaluating whether the previously outlined strategy of stable interest rates would be sufficient for the convergence of inflation to its targets. For this purpose, Copom analyzed the main determinants of the inflation trajectory and how they behaved more recently. 22. Starting with the output gap, a deceleration in economic activity, credit, and more recently in the labor market was observed, as expected by the Committee given the monetary policy lags. In this regard, some members stressed that the deceleration should continue, and it is necessary for the monetary policy channels to act and for inflation to converge to its targets. It was also noted that economic growth prospects have not changed significantly in the recent period. 23. Services inflation has moderated but remains at a level not compatible with the target. The Committee focuses on services inflation since it responds to inflationary inertia and economic activity more directly, and both factors are expected to put less inflationary pressures over the horizon. In any case, this dimension continues to call for attention, and the Committee continues to evaluate the speed with which the convergence process will take place. 24. In the balance of risks, global inflationary pressures have eased, but there is still high uncertainty about the deceleration of the inflation process, which tends to be non-linear. The risks are likely to persist as long as a tight labor market is observed in several advanced economies. Concerning domestic risks, two sets of risks intersect on fiscal issues. Firstly, the fiscal framework revision reduces the visibility on public accounts for the coming years, introduces premia on asset prices, and impacts inflation expectations. Secondly, concerning fiscal stimuli, Copom will continue to monitor their impact on economic activity and inflation and reinforces that, in an environment of a narrowed output gap, the impact on inflation tends to outweigh the desired impact on activity. Some members noted that the implementation of the Ministry of Finance fiscal package should mitigate the fiscal risk and consider that it will be important to monitor the challenges for its implementation. Finally, the risk of a tighter-than-evaluated output gap persists, and the Committee will continue to assess data and models for a more thorough understanding. 25. Regarding downside inflation risks, international commodity prices in local currency have reduced, but the Committee assesses that the risk of a sharper slowdown in global economic activity remains on the horizon, despite this risk is to some degree reduced by China's reopening process. In this regard, the Committee will continue to monitor, on the one hand, the process of withdrawal of fiscal and monetary stimulus in advanced economies and, on the other hand, the Chinese reopening process. 26. Regarding inflation expectations, the Committee notes with concern the recent movement at longer horizons. In addition to the direct impact of the rise in expectations on inflation projections, the rise in long-term expectations raises the cost of the disinflation by requiring greater participation of other monetary policy channels and, consequently, a wider output gap to obtain the same fall in inflation. The Committee will remain vigilant and will persist until the anchoring of expectations is consolidated. 27. Copom’s projections have risen due to the increase in both administered and market prices. Among the preponderant factors for increased projections, the rise in Focus survey inflation expectations stands out. Projections conditioned by the assumptions of the reference scenario do not show convergence to the target over the relevant monetary policy horizon, but the introduction of a more extended monetary tightening, as in its alternative scenario, generates a relevant impact on the projections toward convergence to the targets. 28. Copom chose to maintain the interest rate, reinforcing the need to evaluate, over time, the cumulative impacts to be observed of the intense and timely monetary policy cycle already undertaken. Therefore, the Committee assessed that, given the data released, the inflation projections and expectations, the balance of risks, and the lagged effects of the monetary policy already in significantly contractionary territory, it was appropriate to maintain the interest rate at the level of 13.75% p.a. The Committee reinforced that it is necessary to remain vigilant, assessing if the strategy of maintaining the Selic rate for a longer period than in the reference scenario will be enough to ensure the convergence of inflation. 29. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets, which have shown deterioration at longer horizons since the previous meeting. The Committee emphasizes that it will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 30. Considering the assessed scenarios, the balance of risks, and the broad array of available information, Copom decided to maintain the Selic rate at 13.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks and is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023 and, to a larger degree, 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and fostering full employment. 31. The Committee remains vigilant, assessing if the strategy of maintaining the Selic rate for a longer period than in the reference scenario will be enough to ensure the convergence of inflation. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets, which have shown deterioration at longer horizons since the previous meeting. The Committee reinforces that future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 32. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza, and Renato Dias de Brito Gomes.
br	copom_minutes_20201209.txt	1. Regarding the global outlook, the pandemic resurgence in some major economies is reverting previous mobility gains and should affect short-term activity. However, promising results in COVID-19 vaccine trials tend to improve confidence and growth in the medium term. Economic slack, along with the communication of central banks of major economies, suggests monetary stimuli will last long, resulting in a favorable environment for emerging economies. 2. Turning to the Brazilian economy, recent indicators suggest the uneven recovery in economic activity continues, as expected. However, prospectively, uncertainty about economic growth remains larger than usual, especially for the period starting at the end of this year, concurrently with the expected unwinding of the emergency transfer programs. 3. Various measures of underlying inflation are in levels compatible with meeting the inflation target at the relevant horizon for monetary policy. 4. Inflation expectations for 2020, 2021, and 2022 collected by the Focus survey are around 4.2%, 3.3%, and 3.5%, respectively. 5. The latest inflation readings were higher than expected and, despite the predicted retraction of food price pressures, December inflation should remain elevated, with an off-schedule collection of tuition fees and the transition to the highest level of the electricity rates flag system. Despite the stronger short-term inflationary pressure, the Committee maintains the diagnosis that the current shocks are temporary, but continues to monitor closely its evolution, in particular, the core inflation readings. 6. The Copom's inflation projections in its baseline scenario, with the interest rate path extracted from the Focus survey and exchange rate starting at R$5.25/US$2and evolving according to the purchase power parity (PPP), stand around 4.3% for 2020, and 3.4% for 2021 and 2022. This scenario assumes a path for the Selic rate that ends 2020 at 2.00% p.a., rises to 3.00% p.a. in 2021 and 4.50% p.a. in 2022. In this scenario, inflation projections for administered prices are 2.3% for 2020, 5.7% for 2021, and 3.6% for 2022. 7. The scenario with constant interest rate at 2.00% p.a. and exchange rate starting at R$5.25/US$ and evolving according to the PPP yields inflation projections around 4.3% for 2020, 3.5% for 2021, and 4.0% for 2022. In this scenario, inflation projections for administered prices are 2.3% for 2020, 5.7% for 2021, and 3.7% for 2022. 8. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 9. On the one hand, economic slack may continue to produce a lower-than-expected prospective inflation trajectory, especially when this slack is concentrated in the service sector. This risk increases if a slower reversion of the pandemic effects lengthens the environment of high uncertainty and precautionary savings. 10. On the other hand, an extension of fiscal policy responses to the pandemic that aggravates the fiscal path or a frustration with the continuation of the reform agenda may increase the risk premium. The relative increase in the risks of these events implies an upward asymmetry to the balance of risks, i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 11. Regarding the international economy, the Committee evaluated that new information brings distinct impacts to different horizons. In the short term, the pandemic resurgence, and the resulting increase in social distancing in some of the major economies should interrupt the recovery in demand. In the medium term, however, positive vaccine test results, as well as monetary and fiscal stimuli, should imply a stronger recovery. The perception of economic slack for an extended period, along with the communication of central banks of major economies, creates an environment of liquidity and return of capital flows, favorable to emerging economies. 12. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They judged that the transfer programs from the government have allowed for a relatively strong rebound in durable goods consumption and investment. However, recent data continue to reflect an uneven recovery in economic activity. Prospectively, the unpredictability associated with the pandemic evolution and the necessary adjustment in government spending from 2021 on increases the uncertainty about the economic recovery. The Committee judged that the risks associated with the pandemic evolution may imply a domestic scenario characterized by an even more gradual recovery. 13. The Copom members debated on the level of economic slack. As with activity, the Committee believes that the pandemic continues to have heterogeneous effects on different economic sectors. The transfer programs from the government have reduced slack in the goods sector. Service activities, however, especially those most directly affected by social distancing measures, face a greater reduction in demand. Prospectively, the evolution of these sectoral gaps will depend on the pandemic evolution and on the adjustment in public spending. 14. Next, the Committee discussed the implementation of monetary policy. Since its 232nd meeting, the Copom uses forward guidance, according to which, it does not intend to reduce the monetary stimulus, as long as specified conditions are met. The Committee judged that those conditions continue to hold: inflation expectations, as well as inflation projections for its baseline scenario, remain below the inflation target for the relevant horizon for monetary policy; the current fiscal regime has not been changed; and long-term inflation expectations remain well anchored. 15. The Copom continued its analysis, considering not only the baseline scenario but also the balance of risks. The Committee judged that, at this moment, the upward asymmetry in the balance of risks caused by fiscal risks is sufficient to compensate for the fact that inflation projections in its baseline scenario are below the target in the relevant horizon. The Committee, therefore, deemed as adequate the current level of monetary stimulus, which is being provided by the maintenance of the policy rate at 2.00% p.a. and by the forward guidance. 16. The Committee again pondered over the interpretation of its forward guidance fiscal clause, which conditions the non-elevation of interest rates to the maintenance of the current fiscal regime. The Committee reaffirmed that changes in fiscal policy that affect public debt trajectory, or compromise the fiscal anchor, would motivate a reassessment, even if the spending ceiling in nominal terms is still maintained. This reassessment would follow the inflation target framework, which is based on the analysis of prospective inflation and its balance of risks. 17. Finally, the Committee assessed the next steps in monetary policy, in particular the evolution of the forward guidance clause on expectations and inflation projections converging to the target. In the evaluation of the Copom, this convergence can occur for two reasons: (i) an increase of expectations and projections for 2021, and (ii) the evolution of the horizon, with an increase of the relative weight of 2022, for which the expectations and projections are, at this moment, close enough to the target. Thus, the Committee decided to add to its communication that, although the forward guidance might be withdrawn soon, this would not mechanically imply an increase in interest rates. 18. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to maintain the Selic rate at 2.00% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2021 and 2022. 19. The Committee believes that persevering in the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic recovery. The Copom also stresses that uncertainty regarding the continuation of the reform agenda and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 20. The Committee deems as adequate the current unusually strong level of monetary stimulus, which is being provided by the maintenance of the policy rate at 2.00% p.a. and by the forward guidance introduced in its 232nd meeting. The forward guidance stated that the Copom does not intend to reduce the monetary stimulus as long as specified conditions are met. The Committee judges that those conditions continue to hold. In spite of having increased since the last meeting, in particular for 2021, inflation expectations, as well as inflation projections for its baseline scenario, are still below the inflation target for the relevant horizon for monetary policy; the current fiscal regime has not been changed; and long-term inflation expectations remain well anchored. 21. The Copom judges that, since the adoption of the forward guidance, inflation expectations reverted their declining trend relative to the target for the relevant horizon. Additionally, over the next months, the 2021 calendar-year should become less relevant than the 2022 calendar-year, for which projections and expected inflation are around the target. A scenario of inflation expectations converging to the target suggests that the conditions for maintaining the forward guidance may soon no longer apply, which does not mechanically imply interest rate increases, since economic conditions still prescribe an extraordinarily strong monetary stimulus. In case the forward guidance ceases to apply, monetary policy will follow the inflation target framework, based on the analysis of prospective inflation and its balance of risks. 22. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Feitosa Nechio, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso and Paulo Sérgio Neves de Souza.
br	copom_minutes_20211208.txt	1. Regarding the global outlook, the environment became less favorable. Some central banks in advanced economies expressed more clearly the need for caution given the increased persistence of inflation, turning the environment more challenging for emerging economies. In addition, the real state sector situation in China, the possibility of a winter Covid-19 wave, and the emergence of the Omicron variant add uncertainty about the pace of recovery in advanced economies. These events produced falls in some important commodity prices, but it is still too early to predict the extent of this movement. 2. In relation to the Brazilian economic activity, the release of the third quarter GDP figures revealed a slightly lower-than-expected evolution, although the activities most affected by the pandemic continued on a robust recovery path. Higher frequency indicators point to reduced economic activity, widespread among various sectors, in September and possibly in October. Likewise, the already available confidence indexes for the initial months of the current quarter show deterioration. Consequently, the Committee revised downward its expectations for activity in the short term. 3. For 2022, if, on the one hand, the rise in risk premia and the more intense tightening of financial conditions act stifling the economic activity, on the other hand Copom considers that economic growth tends to benefit from the performance of agriculture and livestock and from the remaining effects of the normalization process of the economy – particularly in the services sector and in the labor market – as the health crisis recedes. 4. Consumer inflation remains high, with increases spread among several components, and has proven to be more persistent than anticipated. The increase of industrial prices has not slowed down and should persist in the short term, whereas services inflation accelerated due to the gradual normalization in the sector’s activity, as expected. Recent readings were higher than expected and the surprise came in both the more volatile components, and on the items associated with core inflation. Prospectively, the significant drop in international energy commodity prices, which have had substantial volatility, has limited the upward revision of short-term projections. 5. The various measures of underlying inflation are above the range compatible with meeting the inflation target. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 10.2%, 5.0%, and 3.5%, respectively. 6. Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at USD/BRL 5.652 and evolving according to the purchasing power parity (PPP), stand around 10.2% for 2021, 4.7% for 2022, and 3.2% for 2023. This scenario assumes a path for the Selic rate that rises to 9.25% p.a. in 2021 and to 11.75% p.a. in 2022, ending the year at 11.25% p.a., and drops to 8.00% p.a. during 2023. In this scenario, inflation projections for administered prices are 16.7% for 2021, 3.8% for 2022, and 5.2% for 2023. The energy flag is “water scarcity” in December 2021 and is assumed to be “red level 2” in December 2022 and in December 2023. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, a possible reversion, even if partial, of the increase in the price of international commodities measured in local currency would produce a lower-than-projected inflation in the baseline scenario. 9. On the other hand, further extensions of fiscal policy responses to the pandemic that increase aggregate demand and deteriorate the fiscal path may pressure the country's risk premium. 10. Despite the more positive public accounts data, the Committee assesses that doubts regarding the fiscal framework increase the risk of deanchoring inflation expectations, keeping the upward asymmetry in the balance of risks. This implies a higher probability of inflation paths above the one projected under the baseline scenario. 11. Uncertainties regarding the future of the current fiscal framework have resulted in increased risk premia and raised the risk of deanchoring inflation expectations. This implies assigning greater probability to alternative scenarios that consider higher neutral interest rates. The Committee reiterates that the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic growth. Weaknesses in the structural reform effort and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 12. Next, Copom discussed the implementation of monetary policy, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, which uses the interest rate path extracted from the Focus survey and the exchange rate evolving according to the purchasing power parity, the inflation projections are above the target for 2022 and around the target for 2023. 13. As for the balance of risks, the Committee pondered that the risk of a deanchoring of longer-term expectations, derived from developments in the fiscal scenario, points to an upward bias for the projections of its baseline scenario. Hence, considering this bias due to asymmetric risks, Copom evaluated that its projections are above the target for both 2022 and 2023. Given this result, Copom concluded that the monetary tightening process should be more restrictive than that used in the baseline scenario throughout the relevant horizon. 14. Next, Copom assessed the appropriate pace of interest rate hikes. For such, it analyzed its inflation projections using simulations with monetary policy paths with different terminal rates, under several alternative scenarios. The Committee also compared scenarios with adjustments greater than 1.50 p.p. with scenarios in which the interest rate remains high for a longer period than that implied in the baseline scenario. 15. Based on these results, Copom members discussed the most appropriate strategy. The Committee concluded that adjustments of 1.50 p.p. at this moment are adequate to reach, throughout the process of monetary tightening, a level restrictive enough not only to ensure the convergence of inflation over the relevant horizon but also to consolidate the anchoring of longer-term expectations. 16. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 1.50 p.p. to 9.25% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to the targets over the relevant horizon for monetary policy, which includes 2022 and 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 17. The Committee considers that, given the increase in its inflation projections and in the risk of deanchoring long-term expectations, it is appropriate to advance the process of monetary tightening significantly into the restrictive territory. The Committee will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate. 18. For the next meeting, the Committee foresees another adjustment of the same magnitude. The Copom emphasizes that its future policy steps could be adjusted to ensure the convergence of inflation towards its targets and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 19. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Magalhães Rumenos Guardado, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.
br	copom_minutes_20210922.txt	1. Regarding the global outlook, the long-lasting monetary stimuli and the reopening of major economies still sustain a favorable environment for emerging markets. 2. Turning to the Brazilian economy, the second quarter GDP release as well as the most recent indicators continue to show a positive evolution and do not ensue relevant revisions in growth forecasts, which display a robust economic recovery during the second half of the year. 3. The various measures of underlying inflation are above the range compatible with meeting the inflation target. 4. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 8.3%, 4.1%, and 3.25%, respectively. 5. Consumer inflation remains high. Industrial goods price increases – due to higher input costs, supply restrictions, and redirecting of services demand towards goods – has not subsided and should remain a pressure in the short run. In addition, services inflation has accelerated in recent months, reflecting the gradual normalization of the sector, as expected. Finally, pressures persist in volatile components such as food and fuel prices and especially electricity fares, due to factors including the exchange rate, commodity prices, and adverse weather conditions. 6. The Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at USD/BRL 5.252 and evolving according to the purchase power parity (PPP), stand around 8.5% for 2021, 3.7% for 2022, and 3.2% for 2023. This scenario assumes a path for the Selic rate that rises to 8.25% in 2021 and to 8.50% during 2022 and drops to 6.75% during 2023. In this scenario, inflation projections for administered prices are 13.7% for 2021, 4.2% for 2022, and 4.8% for 2023. The energy flag is assumed to be “water scarcity” in December 2021 and “red level 2” in December of 2022 and 2023. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, a possible reversion, even if partial, of the recent increase in the price of international commodities measured in local currency would produce a lower-than-projected inflation in the baseline scenario. 9. On the other hand, further extensions of fiscal policy responses to the pandemic that increase aggregate demand and deteriorate the fiscal path may pressure the country's risk premium. In spite of the recent improvement of debt sustainability indicators, the elevated fiscal risk creates an upward asymmetry in the balance of risks, i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 10. Regarding the global outlook, there are two additional risk factors to the growth of emerging economies. First, reductions in forecasts for growth in Asian economies, reflecting the evolution of the Covid-19 Delta variant. Second, a tightening of monetary conditions in various emerging economies, as a reaction to recent inflation surprises. However, the long-lasting monetary stimuli and the reopening of major economies still sustain a favorable environment for emerging markets. The Committee continues to consider that a new round of market discussion regarding inflationary risks in advanced economies could result in a challenging environment for emerging economies. 11. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. The slightly better-than-expected second quarter GDP result was followed by more negative high frequency releases, albeit evolving favorably. These revisions stem partly from an anticipation of the expected growth for some of the sectors hardest hit by the pandemic, and partly from the lower industrial output due to continued shortage in supply chains. The Committee maintained its view of a robust recovery in activity in the second half of the year, as the effects of vaccination are felt more broadly. For 2022, Copom considers that economic growth should benefit from three tailwinds. First, the continued recovery of the labor market and the services sector, even if to a lesser extent than previously anticipated; second, the performance of sectors less dependent on the business cycle – such as agriculture and livestock and the extractive industry; and third, the remaining effects of the normalization of the economy as the health crisis recedes. 12. The Copom members then debated the level of economic slack. The reduction of unemployment - as the workforce and the occupied population - increase denotes that the labor market continues to recover. However, the levels at which the last two variables stand are considerably lower than those observed before the pandemic, suggesting a remaining gap in the labor market. In face of the difference between main employment indicators in the formal jobs segment – Continuous PNAD and Novo Caged, the latter showing a more robust recovery than the former – there are still some difficulties in assessing the real status of the labor market. 13. Next, Copom discussed the implementation of monetary policy, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, which uses the interest rate path extracted from the Focus survey, the exchange rate at purchasing power parity, and commodity prices in USD stable in real terms, the inflation projections are slightly above the targets for 2022 and around the target for 2023. The Committee judged that the fiscal risks continue to imply an upward bias in the projections. This asymmetry in the balance of risks affects the appropriate degree of monetary stimulus thus justifying a path for monetary policy that is more restrictive than the path used in the baseline scenario. 14. In the face of this result, Copom evaluated the costs and benefits of accelerating the pace of interest rate hikes, considering the following. First, the stage of the adjustment cycle is characterized by an already effectively tightening monetary policy, which is evidenced when looking at the difference in expectations for the paths of interest rate and inflation over the relevant monetary policy horizon. Second, simulations with interest rate hikes that assume different terminal rates suggest that the current pace of adjustment is sufficient to reach a significantly restrictive level and to ensure the convergence of inflation to the target in 2022, even considering the asymmetry of the balance of risks. Finally, the weight of volatile items in the revisions of short-term inflation projections and the uniqueness of the post-pandemic economic readjustment process reinforce the benefit of accumulating more information about the state of the economy and the persistence of the existing shocks. 15. Copom concluded that, at this moment, maintaining the current pace of adjustment coupled with the extension of the magnitude of the process of monetary tightening to a significantly restrictive level is the most appropriate strategy for assuring the convergence of inflation to the 2022 and 2023 targets. 16. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, Copom unanimously decided to increase the Selic rate by 1.00 p.p. to 6.25% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2022 and, to a lesser extent, 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 17. The Committee considers that, at the present stage of the tightening cycle, this pace is the most appropriate to guarantee inflation convergence to the target at the relevant horizon and, simultaneously, allow the Committee to obtain more information regarding the state of the economy and the persistence of shocks. At this moment, the Copom’s baseline scenario and balance of risks indicate as appropriate to advance the process of monetary tightening further into the restrictive territory. 18. For the next meeting, the Committee foresees another adjustment of the same magnitude. Copom emphasizes that its future policy steps could be adjusted to ensure the achievement of the inflation target and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 19. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Magalhães Rumenos Guardado, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.
br	copom_minutes_20210317.txt	1. Regarding the global outlook, new fiscal stimuli in some developed countries and the advancement of the Covid-19 immunization programs should promote a more robust economic recovery throughout the year. Economic slack and central bank communication from major economies suggest monetary stimuli will last long. However, market discussion regarding inflationary risks in these economies, and the associated repricing of financial assets, could result in a more challenging environment for emerging economies. 2. Turning to the Brazilian economy, recent indicators, particularly the GDP growth in the fourth quarter of 2020, continued to suggest a consistent economic recovery in spite of the reduction in the emergency income transfers. In general, higher frequency indicators suggest that this movement probably stretched until February, but this view requires caution given the greater difficulty in applying seasonal adjustments, due to recent volatility of data series and the changes to the holiday schedule at the state level. Besides, the latest readings do not capture the effects of the recent sharp increase in the number of Covid-19 cases. Prospectively, uncertainty about economic growth remains larger than usual, especially for the first and second quarters of this year. 3. The various measures of underlying inflation are in levels above the range compatible with meeting the inflation target. 4. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 4.6%, 3.5%, and 3.25%, respectively. 5. The continuing increase in commodity prices, measured in local currency, is affecting current inflation, and has triggered additional increases in inflation forecasts for the next months, especially through its effects on fuel prices. Despite these stronger and more persistent than expected short-term inflationary pressures, the Committee maintains the diagnosis that the current shocks are temporary but continues to closely monitor its evolution. 6. The Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at R$5.70/US$2, and evolving according to the purchase power parity (PPP), stand around 5.0% for 2021 and 3.5% for 2022. This scenario assumes a path for the Selic rate that ends 2021 at 4.50% p.a. and rises to 5.50% p.a. in 2022. In this scenario, inflation projections for administered prices are 9.5% for 2021 and 4.4% for 2022. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, the worsening of the pandemic may delay the economic recovery, producing a lower-than-expected prospective inflation trajectory. 9. On the other hand, an extension of fiscal policy responses to the pandemic that aggravates the fiscal path or a frustration with the continuation of the reform agenda may increase the risk premium. The relative increase in the risks of these events implies an upward asymmetry to the balance of risks, i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 10. Regarding the global outlook, the Committee assessed that the progress in the implementation of Covid-19 immunization programs, the new fiscal stimuli in some developed countries, and the communication by central banks of major economies that monetary stimuli will be long-lasting should imply robust economic growth during the year. However, the discussion about reflation has increased volatility in some markets. This repricing of important financial assets could result in a more challenging environment for emerging economies. 11. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They evaluated that, despite the partial reduction in governmental emergency transfer programs, the economic recovery has been better than expected. However, they noted that the latest available data do not yet account for the possible effects of the recent sharp increase in the number of Covid-19 cases, and that there is considerable uncertainty about the pace of economic growth in the first and second quarters of this year. Looking ahead, the Committee assessed that a possible economic recovery setback due to the worsening of the pandemic would be less extreme than the one observed last year and would probably be followed by another fast recovery. For the Committee, the second half of the year may show a robust recovery, as the effects of vaccination are felt more broadly. 12. Next, the Copom members debated on the level of economic slack. The Committee believes that the pandemic produced heterogeneous effects across economic sectors, and that governmental emergency transfer programs reduced the slack in the goods sector. The Copom judges that economic activity and formal labor market data suggest that the overall slack has declined faster than anticipated, despite the increase in the unemployment rate. 13. Next, the Copom turned to the monetary policy discussion. In the Committee’s opinion, in addition to the strong pace of growth in recent months, with a consequent reduction in economic slack, there has been a reversal in inflation expectations. These expectations have moved to the upper part of the tolerance interval of the inflation target for 2021, and to around the target for 2022, the two calendar years within the relevant monetary policy horizon. As a result, the Copom members concluded that the current scenario ceased to prescribe an extraordinary degree of stimulus, and that the Copom should begin a process of partial normalization of the policy rate. 14. The Copom then discussed the implementation of monetary policy, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, which uses the interest rate trajectory extracted from the Focus survey, the inflation projections are near the upper bound of the tolerance interval in 2021, and around the target in 2022.The Committee pondered that, despite the recent approval of important reforms, which will bring benefits in the medium term, the fiscal risks remain high in the short term due to the worsening of the pandemic, which implies an upward bias to these projections.This asymmetry in the balance of risks affects the appropriate degree of monetary stimulus, justifying a trajectory with a larger initial increase in the policy rate than that implied by the baseline scenario. 15. The Committee also highlighted that the delay in the normalization of the production chains, which puts pressure on production costs and inflation in specific sectors, suggests that there is also a positive demand shock at work.Several members also stressed that the inflationary pressures observed in 2021 may affect inflation expectations for 2022, risking a de-anchoring of expectations over the relevant horizon for monetary policy. Finally, regarding the recent dynamics of inflation, the Committee pointed out that, despite the diagnosis that the current shocks are temporary, the Brazilian inflation targeting regime aims at headline inflation in the calendar year. All these factors have contributed to a more assertive stance in the conduct of monetary policy. 16. Based on all these considerations, the Committee concluded that an initial adjustment of 0.75 p.p. in the Selic rate would be the most appropriate. This swifter adjustment of the degree of stimulus is compatible with meeting the target over the relevant horizon, even in a scenario of a temporary increase in social distancing. 17. Similarly, the Committee assessed that for the next meeting it would be appropriate to continue the process of partial normalization of the monetary stimulus with another adjustment of the same magnitude. The Copom reinforced that its views for the next meeting may be altered if there is a significant change in the inflation projections or the balance of risks, and that, ultimately, the decision will continue to depend on the evolution of economic activity, the balance of risks, and the inflation projections and expectations. 18. Considering the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 0.75 p.p. to 2.75% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2021 and, mainly, 2022. 19. The Committee believes that persevering in the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic recovery. The Copom also stresses that uncertainty regarding the continuation of the reform agenda and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 20. The Copom members consider that the current conditions ceased to prescribe an extraordinary stimulus. GDP ended 2020 growing strongly at the margin, recovering most of its first half-year decline, and inflation expectations rose above target at the relevant horizon for monetary policy. Additionally, inflation projections increased to levels close to the upper bound of the target for 2021. 21. Therefore, the Copom decided to start a process of partial normalization by reducing the extraordinary degree of monetary stimulus. For all the aforementioned reasons, the Committee considered appropriate an adjustment of 0.75 p.p. in the Selic rate. In the Committee's evaluation, a swifter adjustment has the benefit of reducing the probability of not meeting the inflation target in 2021, as well as of keeping longer horizon expectations well anchored. Additionally, the broad set of information available to the Committee suggests that this strategy is consistent with meeting the 2022 inflation target, even if social distancing increases temporarily. 22. For the next meeting, unless there is a significant change in inflation projections or in the balance of risks, the Committee foresees the continuation of the partial normalization process with another adjustment, of the same magnitude, in the degree of monetary stimulus. The Copom emphasizes that its view for the next meeting will continue to depend on the evolution of economic activity, the balance of risks, and inflation projections and expectations. 23. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Feitosa Nechio, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso and Paulo Sérgio Neves de Souza.
br	copom_minutes_20210505.txt	1. Regarding the global outlook, new fiscal stimuli in some developed countries and the advancement of the Covid-19 immunization programs should promote a more robust economic recovery throughout the year. Economic slack and central bank communication from major economies suggest monetary stimuli will last long. However, market discussion regarding inflationary risks in these economies could result in a more challenging environment for emerging economies. 2. Turning to the Brazilian economy, recent indicators are evolving better than expected in spite of the second wave of the pandemic being more intense than anticipated. Prospectively, uncertainty about economic growth still remains larger than usual but should gradually return to its normal level. 3. The various measures of underlying inflation are at the top of the range compatible with meeting the inflation target. 4. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 5.0%, 3.6%, and 3.25%, respectively. 5. With the exception of oil, commodity prices continued to increase, impacting food and industry price projections. Additionally, the transition to higher energy prices related to the electricity tariff flag system should keep inflation under pressure in the short run. The Committee maintains the diagnosis that the current shocks are temporary but continues to closely monitor its evolution. 6. The Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at R$5.40/US$2 and evolving according to the purchase power parity (PPP), stand around 5.1% for 2021 and 3.4% for 2022. This scenario assumes a path for the Selic rate that ends 2021 at 5.50% p.a. and rises to 6.25% p.a. in 2022. In this scenario, inflation projections for administered prices are 8.4% for 2021 and 5.0% for 2022. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, economic recovery from the pandemic can be slower than estimated, producing a lower-than-expected prospective inflation trajectory. 9. On the other hand, further extensions of fiscal policy responses to the pandemic that aggravate the fiscal path, or a frustration with the continuation of the reform agenda, may add pressure to the country's risk premium. The relative increase of the risks of these events implies an upward asymmetry to the balance of risks, i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 10. Regarding the global outlook, the Committee assessed that the progress in the implementation of Covid-19 immunization programs, the new fiscal stimuli in some developed countries, and the communication by central banks of major economies that monetary stimuli will be long-lasting should imply robust economic growth during the year. However, the discussion about “reflation”, in particular about the risk of a lasting inflation increase in the United States, could result in a more challenging environment for emerging economies. 11. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They considered that, despite the greater-than-expected intensity of the second wave of the pandemic, the latest available economic activity data have surprised positively. For the Committee, the second half of the year should bring a robust recovery, as the effects of the vaccine rollout are felt more broadly. 12. The Copom members then debated the level of economic slack. Although the economic slack as a whole is returning to the late 2019 level in the coming quarters, the Committee considered that the pandemic produced heterogeneous effects across economic sectors. Whereas the goods sector operates with low slack, the service sector is struggling to recover. The Copom judges that economic activity and formal labor market data suggest that the overall slack has declined faster than anticipated, despite the increase in the unemployment rate. 13. Next, the Copom discussed the implementation of monetary policy, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, which uses the interest rate path extracted from the Focus survey, inflation projections are slightly below the target for 2022. The Committee pondered that short-term fiscal risks remain high, implying an upward bias in these projections. This asymmetry in the balance of risks affects the appropriate degree of monetary stimulus, therefore justifying a 0.75 p.p. increase in the interest rate in this meeting. 14. The Copom then evaluated different normalization paths for the Selic rate. Considering the baseline scenario and the balance of risks, the Committee deemed appropriate another adjustment of the same magnitude in the next meeting, unless inflation determinants change. Additionally, the Committee noted that subsequent uninterrupted increases in the interest rate up to the level considered neutral imply projections considerably below the inflation target at the relevant horizon. The Copom reinforced that its views for the next meeting may be altered if there is a change in inflation projections or in the balance of risks, since the decision will continue to depend on the evolution of economic activity, the balance of risks, and the inflation projections and expectations. 15. The Committee then discussed the communication of monetary policy and, in particular, the reference to a “partial normalization” of the interest rate. The Committee members pointed out that “partial normalization” reflects their opinions on the appropriate monetary policy for the convergence of inflation to target over the relevant horizon. The Copom understands that the reference to "partial normalization", as well as the disclosure of the implicit neutral rate and the output gap in the models used by the Committee, increases the transparency of the Central Bank’s reaction function and, consequently, improves monetary policy efficiency. Naturally, the Copom reevaluates its scenario at every meeting committed to the convergence of inflation to the target over the relevant horizon. 16. Considering the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 0.75 p.p. to 3.50% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2022. Without compromising its fundamental objective of price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 17. At this moment, the Copom's baseline scenario indicates that a partial normalization of the policy rate remains appropriate to keep some degree of monetary stimulus during the economic recovery. However, the Committee emphasizes that there is no commitment with this plan, and that future steps of monetary policy could be adjusted to assure the achievement of the inflation target. 18. For the next meeting the Committee foresees the continuation of the partial normalization process with another adjustment of the same magnitude in the degree of monetary stimulus. The Copom emphasizes that its view will continue to depend on the evolution of economic activity, the balance of risks, and inflation projections and expectations. 19. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Feitosa Nechio, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso and Paulo Sérgio Neves de Souza.
br	copom_minutes_20220202.txt	1. Regarding the global outlook, the environment remains less favorable. More persistent inflation raises the chances of faster monetary tightening in the US, turning financial conditions more challenging for emerging economies. In addition, the recent Covid-19 wave adds uncertainty about the pace of activity, and at the same time could delay the normalization of global supply chains. Since the previous meeting, most commodities reversed the decline observed at the end of the year and, in some cases, reached recent records, reinforcing the global environment of pressured prices. 2. Turning to the Brazilian economic activity, trade and services indicators showed a slightly better-than-expected evolution in November, while industry recovered in December. Labor market indicators showed consistent job recovery in 2021Q4. 3. For 2022, if, on the one hand, the rise in risk premia and the more intense tightening of financial conditions act stifling the economic activity, on the other hand Copom still considers that economic growth tends to benefit from the performance of agriculture and livestock and from the remaining effects of the normalization process of the economy, particularly in the services sector and in the labor market. However, confidence indexes released since the previous meeting continue to deteriorate, and weather developments have affected the projections for important agricultural crops. 4. Consumer inflation remains high, with increases spread among several components, and continues to be more persistent than anticipated. The increase of industrial prices has not slowed down and should persist in the short term, while services inflation accelerated, still reflecting the gradual normalization in the sector’s activity. Recent readings were higher than expected and the surprise came in both the more volatile components and particularly on the items associated with core inflation. 5. The various measures of underlying inflation are above the range compatible with meeting the inflation target. Inflation expectations for 2022 and 2023 collected by the Focus survey are around 5.4% and 3.5%, respectively. 6. The Copom's inflation projections in its reference scenario2, with interest rate path extracted from the Focus survey and exchange rate starting at USD/BRL 5.453 and evolving according to the purchasing power parity (PPP), stand around 5.4% for 2022 and 3.2% for 2023. This scenario assumes a path for the Selic rate that rises to 12% p.a. in the first half of 2022, ends the year at 11.75% p.a., and drops to 8.00% p.a. during 2023. In this scenario, inflation projections for administered prices are 6.6% for 2022 and 5.4% for 2023. The energy flag is assumed to be “red level 1” in December of 2022 and 2023. 7. Regarding administered prices, the revision was mainly due to the strong increase in oil prices since the previous meeting of the Committee, as well as administered items whose variations will be repeated throughout the year. These pressures were only partially offset by the change in the hypothesis of the energy flag for the end of 2022, which reflected the improved rainfall scenario. 8. The Copom’s reference scenario for inflation encompasses risk factors in both directions. 9. On the one hand, a possible reversion, even if partial, of the increase in the price of international commodities measured in local currency would produce a lower-than-projected inflation in the reference scenario. 10. On the other hand, fiscal policies that imply additional impulses to aggregate demand or deteriorate the future fiscal path may have a negative impact on prices of important financial assets as well as pressure the country’s risk premia. 11. In spite of the more favorable public accounts data, the Committee assesses that the uncertainties regarding the fiscal framework maintain elevated the risk of deanchoring inflation expectations and, therefore, the upward asymmetry in the balance of risks. This implies a higher probability of inflation paths above the one projected under the reference scenario. 12. Uncertainties regarding the future of the current fiscal framework result in increased risk premia and raises the risk of deanchoring inflation expectations. This implies assigning greater probability to alternative scenarios that consider higher neutral interest rates. The Committee reiterates that the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic growth. Weaknesses in the structural reform effort and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. Additionally, the Committee notes that even fiscal policies that have a downward effect on inflation in the short term can cause a deterioration in the country's risk premia, increase inflation expectations, and consequently have an upward effect on prospective inflation. 13. Next, Copom discussed the implementation of monetary policy, considering not only the reference scenario, but also the balance of risks for inflation. According to the reference scenario, which uses the interest rate path extracted from the Focus survey and the exchange rate evolving according to the purchasing power parity, the inflation projections are above the upper limit of the tolerance band of the target for 2022, and around the target for 2023. 14. As for the balance of risks, the Committee pondered that the risk of deanchoring longer-term expectations, derived from developments in the fiscal scenario, sustains an upward bias for the projections of its reference scenario. Hence, considering this bias due to asymmetric risks, Copom evaluated that its projections are above the target for both 2022 and 2023. Therefore, Copom once more concluded that the monetary tightening process should be more restrictive than that used in the reference scenario throughout the relevant horizon. 15. Next, Copom assessed the appropriate pace of interest rate hikes. For such, it analyzed its inflation projections using simulations with monetary policy paths with different terminal rates, adjustment paces, and duration of monetary tightening. It is worth noting that the scenarios considered, consistent with the convergence of inflation to its targets, assumed a higher interest rate path than that used in the reference scenario. 16. Based on these results, Copom members discussed the most appropriate strategy. The Committee concluded that another adjustment of 1.50 percentage points, followed by additional adjustments at a slower pace in the next meetings, is the most appropriate strategy to achieve sufficient monetary tightening and ensure inflation convergence over the relevant horizon, as well as the anchoring of long-term inflation expectations. 17. Finally, the particularly high uncertainty surrounding important asset and commodity prices, as well as the stage of the tightening cycle, led the Committee to judge more appropriate, at this moment, not to signal the size of its future steps. 18. Taking into account the reference scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 1.50 p.p. to 10.75% p.a. The Committee judges that this decision reflects its reference scenario for prospective inflation, a higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target throughout the relevant horizon for monetary policy, which includes 2022 and, to a larger degree, 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 19. The Committee considers that, given the increase in its inflation projections and in the risk of deanchoring long-term expectations, it is appropriate to advance the process of monetary tightening significantly into the restrictive territory. The Committee emphasizes that it will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate. 20. For its next steps, the Committee foresees as adequate, at this moment, a reduction in the pace of adjustment of the interest rate. This indication reflects the stage of the tightening cycle as its cumulative effects will manifest themselves over the relevant horizon. The Copom emphasizes that its future policy steps could be adjusted to ensure the convergence of inflation towards its targets and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 21. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fernanda Magalhães Rumenos Guardado, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.
br	copom_minutes_20190206.txt
br	copom_minutes_20201028.txt	1. Regarding the global outlook, the strong recovery in some economic sectors seems to be subsiding, partly due to the pandemic resurgence in some major economies. There is significant uncertainty regarding the evolution of this scenario due to a possible decline in government stimuli and to the evolution of the COVID-19 itself. However, the moderation in financial assets volatility keeps resulting in a relatively favorable environment for emerging economies. 2. Turning to the Brazilian economy, similarly to other countries, recent indicators suggest an uneven recovery in economic activity. Sectors more directly affected by social distancing measures remain depressed despite the offsetting effects of the transfer programs. Prospectively, uncertainty about economic growth remains larger than usual, especially for the period starting at the end of this year, concurrently with the expected unwinding of the emergency transfer programs. 3. The various measures of underlying inflation are in levels compatible with meeting the inflation target at the relevant horizon for monetary policy. 4. Inflation expectations for 2020, 2021, and 2022 collected by the Focus survey are around 3.0%, 3.1%, and 3.5%, respectively. 5. The latest inflation readings were higher than expected, and the Committee raised its projection for the remaining months of 2020. This revision was due to continuing food and industrial price increases which, in turn, are a consequence of a persistent exchange rate depreciation, the oil price rise, and the income transfer programs. On the one hand, the partial normalization of some depressed prices should continue, in a context of a recovery in mobility indices and activity level. On the other hand, some prices, which rose extraordinarily due to a temporary reduction in supply in conjunction with an occasional increase in demand, are expected to reverse. Therefore, in spite of the stronger-than-expected inflationary pressure, the Committee maintains the diagnosis that this shock is temporary, although closely monitoring its evolution. 6. The Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at R$5.60/US$2 and evolving according to the purchase power parity (PPP), stand around 3.1% for 2020, 3.1% for 2021 and 3.3% for 2022. This scenario assumes a path for the Selic rate that ends 2020 at 2.00% p.a., rises to 2.75% p.a. in 2021 and 4.50% p.a. in 2022. In this scenario, inflation projections for administered prices are 0.8% for 2020, 5.1% for 2021, and 3.9% for 2022. 7. The scenario with constant interest rate at 2.00% p.a. and exchange rate starting atR$5.60/US$ and evolving according to the PPP yields inflation projections around 3.1% for 2020, 3.2% for 2021 and 3.8% for 2022. In this scenario, inflation projections for administered prices are 0.8% for 2020, 5.1% for 2021, and 4.0% for 2022. 8. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 9. On the one hand, economic slack may continue to produce a lower-than-expected prospective inflation trajectory, especially when this slack is concentrated in the service sector. This risk increases if a slower reversion of the pandemic effects lengthens the environment of high uncertainty and precautionary savings. 10. On the other hand, the extension of fiscal policy responses to the pandemic that aggravate the fiscal path or a frustration with the continuation of the reform agenda may increase the risk premium. The relative increase in the risks of these events imply an upward asymmetry to the balance of risks, i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 11. Regarding the international economy, the recent pandemic resurgence and the consequent increase in social distancing in some of the major economies may interrupt recovery in demand. A potential non-organized and abrupt reduction of governmental stimuli also brings risks to the economic recovery. For now, however, the reduction in financial asset volatility keeps resulting in a relatively favorable environment for emerging economies. Still, the Committee judged that there is significant uncertainty about the evolution of this scenario. 12. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They assessed that recent data suggest an uneven recovery in economic activity. The transfer programs from the government have allowed for a relatively strong rebound in durable goods consumption and investment. However, several service sector activities, especially those more directly affected by social distancing measures, remain significantly depressed. Prospectively, the unpredictability associated with the pandemic evolution and the necessary adjustment in government spending from 2021 onwards increases the uncertainty about the maintenance of the economic activity recovery. The Committee considered that this unpredictability and the risks associated with the evolution of the pandemic may imply a domestic scenario characterized by an even more gradual economic recovery. 13. The Copom members debated on the level of economic slack. As with activity, the Committee believes that the pandemic should continue to have heterogeneous effects on the economic sectors. Given the nature of the shock, the economic slack in the service sector should remain larger than in other sectors. The Committee concluded that the nature of the crisis probably implies that disinflationary pressures from reduced demand may last longer than in previous recessions. 14. The Committee then resumed the discussion of a potential effective lower limit for the Brazilian policy interest rate and its connection with prudential and financial stability issues. Considering the long history of the Brazilian economy operating at very high levels of Selic rate, unprecedented low interest rates may compromise the performance of some markets and economic sectors, with a potential impact on financial intermediation. For the majority of the Copom members, we would already be close to the level from which further interest rate reductions could be accompanied by asset price instability 15. Subsequently, the Copom members discussed on the maintenance of the signaling that “the remaining space for monetary policy stimulus, if it exists, should be small”. The Committee assessed that this signaling is due to prudential restrictions regarding reductions of the Selic rate and, therefore, should be kept in communication. 16. Next, the Committee discussed the implementation of the monetary policy itself. Since its 232nd Meeting, the Copom has adopted forward guidance, according to which, it does not intend to reduce the monetary stimulus as long as specified conditions are met. The Committee judged that those conditions continue to hold: inflation expectations, as well as inflation projections for its baseline scenario, are significantly below the inflation target for the relevant horizon for monetary policy; the current fiscal regime has not been changed; and long-term inflation expectations remain well anchored. 17. The Copom continued its analysis, considering not only the baseline scenario, but also the balance of risks, and restrictions of prudential nature. Regardless of prudential restrictions, the Copom considered that, at this moment, the upward asymmetry in the balance of risks caused by fiscal risks is sufficient to compensate the fact that its inflation projections in the baseline scenario are below the target at the relevant horizon. The Committee, therefore, deemed as adequate the current level of monetary stimulus, which is being provided by the maintenance of the policy rate at 2.00% p.a. and by the forward guidance, regardless of prudential nature restrictions. 18. Finally, the Committee discussed the interpretation of the fiscal clause of its forward guidance, which conditions the non-elevation of interest rates to the maintenance of the current fiscal regime. The Committee judged that changes in the fiscal policy that affect the public debt trajectory or compromise the fiscal anchor would motivate a reassessment, even if the spending ceiling in nominal terms is still maintained. This reassessment would follow the usual guidance of an inflation targeting regime, based on prospective inflation and its balance of risks. 19. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to maintain the Selic rate at 2.00% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2021 and 2022. 20. The Committee believes that persevering in the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic recovery. The Copom also stresses that uncertainty regarding the continuation of the reform agenda and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 21. The Copom believes that the current economic conditions continue to recommend an unusually strong monetary stimulus but it recognizes that, due to prudential and financial stability reasons, the remaining space for monetary policy stimulus, if it exists, should be small. 22. The Committee deems as adequate the current level of monetary stimulus, which is being provided by the maintenance of the policy rate at 2.00% p.a. and by the forward guidance introduced in its 232nd meeting. The forward guidance stated that the Copom does not intend to reduce the monetary stimulus as long as specified conditions are met. The Committee judges that those conditions continue to hold: inflation expectations, as well as inflation projections for its baseline scenario, are significantly below the inflation target for the relevant horizon for monetary policy; the current fiscal regime has not been changed; and long-term inflation expectations remain well anchored. 23. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Feitosa Nechio, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso and Paulo Sérgio Neves de Souza.
br	copom_minutes_20200916.txt	1. Regarding the global outlook, the recovery in major economies, although uneven across sectors, along with a moderation in financial assets volatility, is resulting in a relatively favorable environment for emerging economies. However, there is significant uncertainty regarding the evolution of this scenario due to a possible decline in government stimuli and to the evolution of the Covid-19 pandemic itself. 2. Turning to the Brazilian economy, recent indicators suggest a partial recovery in economic activity. This is similar to the pattern of other economies, where sectors more directly affected by social distancing measures remain depressed. The transfers and other government programs have allowed the Brazilian economy to recover faster than other emerging countries. Prospectively, uncertainty about economic growth remains larger than usual, especially for the period starting at the end of this year, concurrently with the expected unwinding of the emergency programs. 3. Various measures of underlying inflation remain below the level compatible with meeting the inflation target at the relevant horizon for monetary policy. 4. Inflation expectations for 2020, 2021, and 2022 collected by the Focus survey are around 1.9%, 3.0%, and 3.5%, respectively. 5. Consumer inflation should rise in the short term due to a temporary food price increase and a partial normalization of some service prices, in a context of a recovery in activity and mobility. Administered prices should change moderately reflecting a decline in health plan rates in September and an expected drop in gasoline prices by October. 6. The Copom's inflation projections in the hybrid scenario with interest rate path extracted from the Focus survey and constant exchange rate at R$5.30/US$2 stand around 2.1% for 2020, 2.9% for 2021 and 3.3% for 2022. This scenario assumes a path for the Selic rate that ends 2020 at 2.0% p.a., rises to 2.5% p.a. in 2021 and 4.5% p.a. in 2022. In this scenario, inflation projections for administered prices are 0.0% for 2020, 4.3% for 2021, and 3.7% for 2022. 7. The scenario with constant interest rate at 2.00% p.a. and constant exchange rate at R$5.30/US$ yields inflation projections around 2.1% for 2020, 3.0% for 2021 and 3.8% for 2022. In this scenario, inflation projections for administered prices are 0.0% for 2020, 4.3% for 2021, and 3.9% for 2022. 8. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 9. On the one hand, economic slack may continue to produce a lower-than-expected prospective inflation trajectory, especially when this slack is concentrated in the service sector. This risk increases if a slower reversion of the pandemic effects lengthens the environment of high uncertainty and precautionary savings. 10. On the other hand, fiscal policy responses to the pandemic that aggravate the fiscal path for a long time or frustrations regarding the continuation of the reform agenda may increase the risk premium. Additionally, the credit and transfer programs implemented in response to the pandemic may cause a smaller-than-estimated decline in aggregate demand, introducing an asymmetry to the balance of risks. This set of factors could potentially result in a higher-than-expected path for inflation over the relevant horizon for monetary policy. 11. Regarding the global outlook, the recovery in major economies, although concentrated in the goods market, along with a moderation in financial assets volatility, is resulting in a relatively favorable environment for emerging economies. The Committee considered, however, that there is significant uncertainty about the evolution of this benign scenario. A possible sudden and unorganized reduction in government stimuli may delay the recovery of consumption and inventories. Meanwhile, the evolution of the Covid-19 pandemic may act as a limit to the full recovery of the service sector. 12. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They evaluated that recent data suggest a partial recovery of economic activity. Government transfer programs have allowed for a relatively strong rebound in durable goods consumption and investment. However, several service sector activities, especially those more directly affected by social distancing measures, remain significantly depressed. Looking forward, the poor predictability associated with the evolution of the pandemic and the necessary decline in emergency aid by the end of 2020 increase uncertainty about the speed of the economic recovery. The Committee considered that this unpredictability and the risks associated with the evolution of the pandemic may imply a domestic scenario characterized by an even more gradual recovery of the economy. 13. The Copom members debated on the level of economic slack. As with activity, the Committee believes that the pandemic should continue to have heterogeneous effects on the economic sectors. Given the nature of the shock, the service sector should continue to have a larger economic slack than other sectors. The Committee concluded that the nature of the crisis probably implies that the disinflationary pressures from reduced demand may last longer than in previous recessions. 14. The Committee then resumed the discussion of a potential effective lower limit for the Brazilian policy interest rate and its connection with prudential and financial stability issues. For the majority of the members of the Copom, this limit would be significantly higher among emerging economies than among developed countries due to the existence of a risk premium. This premium is dynamic and tends to be larger in Brazil, given the country's relative fiscal fragility and the uncertainties regarding its prospective fiscal path. In this context, we would already be close to the level from which further interest rate reductions could be accompanied by asset price instability. 15. The Copom also discussed the relative importance of the main components of credit and operating costs of the financial system. Considering the long history of the Brazilian economy operating with the reference interest rate at a very high level, the unprecedented low interest rates may compromise the performance of some markets and economic sectors, with potential impact on financial intermediation. Based on results from stress test scenarios, the Committee concluded that the financial system is resilient to the credit risk arising from the current pandemic. However, in analyzing the financial system in a broad way – considering its various industries, markets, products and financial services – the Committee reflected that an unprecedented low interest rate environment may increase asset prices volatility. Moreover, without the necessary time to transition to a new environment, it may affect the proper functioning and dynamics of the financial system and the capital markets. Hence, the Committee concluded that possible new interest rates reductions would demand caution and additional gradualism. To this end, if necessary, further interest rate cuts would require greater clarity about prospective inflation and activity and could be spaced over time. 16. In order to raise the degree of monetary stimulus provided by the traditional instrument, but maintaining the necessary caution for prudential reasons, since its 232nd Meeting, the Copom has adopted forward guidance as an additional monetary policy instrument. 17. To adapt the forward guidance to the dynamic limits imposed by prudential issues, the Committee considered that it should have an asymmetric policy intention, in which, if the necessary conditions were met, the Copom would not raise the interest rate but could reduce it. To maximize its effectiveness, the Committee decided that this forward guidance should be conditional on inflation expectations, as well as on the inflation projections of its baseline scenario, for the relevant monetary policy horizon, which currently includes 2021 and, to a lesser extent, 2022. This information on inflation would be considered altogether and, when they were sufficiently close to the inflation target for the corresponding horizon, they would indicate the end of the intention. 18. Given the difficulties inherent in using forward guidance in emerging economies, in addition to expectations and projections of inflation in the relevant horizon, the Committee also deemed necessary to condition its interest rate policy intention on two other factors. First, it is conditional on the maintenance of the fiscal regime, since its rupture would imply significant changes to the structural interest rate of the economy. Second, it is conditional on the anchoring of long-term inflation expectations, given that an unanchoring would indicate that the costs derived from the monetary stimulus would be outweighing its benefits. 19. Finally, the Copom judged that the conditions for the maintenance of the forward guidance continue to be met. The Committee considers that inflation expectations, as well as inflation projections for its baseline scenario, are significantly below the inflation target for the relevant monetary policy horizon; the current fiscal regime has not been changed; and long-term inflation expectations remain well anchored. 20. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to maintain the Selic rate at 2.00% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with the convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2021 and, to a lesser extent, 2022. 21. The Committee believes that persevering in the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic recovery. The Copom also stresses that doubts regarding the continuation of the reform agenda and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 22. The Copom believes that the current economic conditions continue to recommend an unusually strong monetary stimulus, but it recognizes that, due to prudential and financial stability reasons, the remaining space for monetary policy stimulus, if it exists, should be small. Consequently, possible future adjustments to the current degree of monetary stimulus would occur with additional gradualism and would depend on the perception of the fiscal trajectory, as well as on new information that changes the Committee's current assessment about prospective inflation. 23. To provide the monetary stimulus deemed adequate to meet the inflation target, but maintaining the necessary caution for prudential reasons, the Copom considered appropriate to continue to adopt forward guidance as an additional monetary policy tool. Therefore, despite the asymmetry on its balance of risks, the Copom does not intend to reduce the monetary stimulus unless inflation expectations, as well as its baseline scenario inflation projections, are sufficiently close to the inflation target at the relevant horizon for monetary policy, which currently includes 2021 and, to a lesser extent, 2022. This intention is conditional on the maintenance of the current fiscal regime and on the anchoring of long-term inflation expectations. 24. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Feitosa Nechio, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso and Paulo Sérgio Neves de Souza.
br	copom_minutes_20230802.txt	1. The global environment remains uncertain, with some disinflation at the margin but with still high core inflation, gradual slowdown in economic activity, and resilience in the labor market of many countries. At the same time, the central banks of major economies remain committed to bringing inflation back to its targets, either by continuing their monetary tightening cycles or by signaling a prolonged period of high interest rates to fight inflationary pressures. This stance continues to call for greater caution in the conduct of economic policies, particularly by emerging countries. 2. Regarding the domestic scenario, the recent set of indicators suggests a scenario of gradual deceleration of activity. Apart from the strong performance of agriculture, concentrated in the first quarter, the pace of activity growth continues to corroborate the scenario anticipated by the Committee. In general, there is some retraction in the trade sector, stability in industry and some accommodation in the services sector, after a stronger growth pace in previous quarters. The labor market remains resilient but with some moderation at the margin. 3. Consumer inflation continues to show more benign current dynamics, particularly in industrial goods and food components. Although the inflation of the components more sensitive to the economic cycle and the monetary policy, which have greater inflationary inertia, declined, they remain above the inflation target. Inflation expectations for 2023, 2024, and 2025 collected by the Focus survey have reduced and are around 4.8%, 3.9%, and 3.5%, respectively. 4. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 4.752 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “green” in December 2023, 2024, and 2025. In this scenario, Copom’s inflation projections stand at 4.9% for 2023, 3.4% for 2024, and 3.0% for 2025. Inflation projections for administered prices are 9.4% for 2023, 4.6% for 2024, and 3.5% for 2025. 5. The Committee evaluates that the international outlook is uncertain. The Committee noted the resilience of activity and the labor market in advanced economies, even if some moderation is observed at the margin, as well as lower growth projection for the Chinese economy. In this context some members see a mild moderation in activity in major economies as more likely, although a sharper slowdown is not ruled out. A disinflation process at the margin is observed, reflecting the slowdown of commodity pressures after the initial impacts of the war in Ukraine and the normalization of productive sectors, but with a slow decline in core inflation. Looking ahead, uncertainties remain about the global inflation dynamics. The downward movement in commodity prices has stalled in the recent period, and risks related to weather phenomena, the war in Ukraine, and international oil pricing policy suggest the possibility of renewed supply-side inflationary pressures. Furthermore, it is observed resilience of the labor market and tight output gap in advanced economies, in an environment of still pressured services inflation in several economies. Thus, central banks remain committed to control inflation by maintaining tighter monetary policy for a longer period. Such determination, albeit with a likely impact upon domestic asset prices in the short term, coupled with a credit slowdown in major economies, contributes to a more credible and lasting global disinflationary process. Moreover, the Committee considered that the synchronization of contractionary monetary policy may have a larger-than-expected impact on the global output gap and on the disinflation process. The larger-than-expected upward impact on inflation of the synchronization of expansionary fiscal and monetary policies across countries during the pandemic was mentioned again. 6. Growth data for Brazil remain consistent with the reference scenario of moderating activity anticipated by the Committee. The process of rebalancing the consumption basket, and, consequently, relative prices, between goods and services continues, with moderation in the consumption of goods in favor of greater demand in the services segment. However, the services sector has been moderating in recent months. In addition, more timely data continue to suggest that the pace of economic growth is in line with the Committee's expectations. Again, an in-depth discussion of developments in the labor market took place. Some members still consider that there is a recent moderation in the labor market, which points to the slowdown in the pace of hirings in the formal market and the decline in the participation rate. Other members emphasized the drop in the unemployment rate and the still high pace of hirings in formal employment. The Committee agreed that there is no evidence of high wage pressures in labor negotiations. Some members noted that the recent process towards a partial recomposition of previous losses in real wages moves forward. This movement is expected and has been accompanied by a deceleration in nominal gains, which is expected to intensify ahead. 7. The Committee analyzed different output gap metrics and assumptions, comparing not only the estimate of the current gap level under different methods, but also their impacts on the inflation projection. It was noted that the speed with which the gap is assumed to close over the projection horizon is as important as the initial level assumed for the gap. It was then discussed the risk that the output gap is tighter than assumed in the reference scenario, in particular in the labor market, and assessed the impacts of this alternative assumption on inflation projections. The Committee emphasizes that the output gap is an unobservable variable, subject to uncertainty in its measurement and with even greater uncertainty after the pandemic period. 8. The Committee believes that the disinflation dynamics continues to be characterized by a process with two distinct stages. The first-stage movement proved deeper than expected, given the more benign dynamics of food and industrial prices and the behavior of wholesale prices. In this regard, the recent dynamics of the exchange rate and international commodity prices, although with greater volatility, has contributed to slow down international pressures on inflation in Brazil. On the one hand, this phenomenon improves the dynamics of the second stage of disinflation, with lower inertia on core inflation and services inflation. On the other hand, the inherent volatility of food and industrial goods components suggests the possibility of abrupt reversals, recommending caution. In this debate, the risks related to El Niño, which were partially incorporated into the reference scenario, were mentioned, as were those related to international oil price developments, which followed the Committee's usual governance in its assumptions. In the end, it was unanimously concluded that a contractionary and cautious monetary policy was needed to reinforce the disinflationary dynamics. 9. Also in the discussion on inflationary behavior, the current stage of the disinflationary process and the recent behavior of services inflation were discussed in depth. It was noted that the indicators of this segment point to continuity in the trajectory of disinflation in the recent period, despite some oscillation at levels still above the value compatible with the target. In such a discussion, it was emphasized that it is more relevant to focus on its underlying fundamentals – in particular, possible changes in the labor market and in the dynamics of activity – than on punctual movements in services inflation, relative to some component or some period. 10. Inflation expectations have shown partial reanchoring since the previous Copom meeting. The Committee emphasized the credibility gain produced by the June meeting of the National Monetary Council (CMN), which established the inflation target for 2026, as well as its tolerance range, at the same values as those for 2024 and 2025 and without revising the targets and ranges previously established for 2023, 2024, and 2025. In addition, the announcement of a change to a continuous target system, with rules yet to be set out, has reduced uncertainty about the targets for subsequent years, also contributing to further reanchoring. Therefore, there was a positive impact on inflation expectations immediately after the CMN's decision, reinforcing the interpretation that the inflation targeting regime has gained credibility. 11. However, the reanchoring is still partial and the Committee discussed again the reasons for such deanchoring. Members raised several possibilities. The Committee removed residual uncertainty about the approval of the fiscal framework from its balance of risks but noted in its discussion that fiscal dynamics remained relevant in its reference scenario. In particular, some members assessed that some uncertainty persists among agents about overcoming fiscal challenges, evidenced in primary balance expectations that diverge from the targets set by the government, and that this may also be reflected in unanchored inflation expectations for longer maturities. In this case, anchoring expectations around the targets set out in the new fiscal framework, with the maintenance of the fiscal commitment in addition to a reduction in uncertainties about the tax measures that underpin the implementation of this objective, would contribute to a faster disinflationary process. Others evaluated that a global scenario with higher inflation also makes it difficult to reanchor expectations, since there is a possibility of external inflation at higher levels for a longer period. Finally, the hypothesis of the agents’ perception that, over time, the Banco Central do Brasil (BCB) would become more lenient in fighting inflation was mentioned. Copom members unanimously understand that, regardless of the BCB’s board composition, the Institution’s credibility and reputation should be ensured. 12. Copom reminds that structural reforms and the predictability of public accounts are essential to increase the economy’s productivity, raise the potential growth, and improve the confidence of business, investors, and households. The lack of commitment with structural reforms, the increase of earmarked credit granting, and the uncertainties about the stabilization of the public debt have the potential to raise the neutral interest rate of the economy, with harmful impacts on the monetary policy power and, consequently, on its cost to the economy. 13. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; and (ii) a stronger than expected resiliency on services inflation due to a tighter output gap. Among the downside risks, it should be noted (i) a greater than projected deceleration of global economic activity, particularly due to adverse conditions in the global financial system; and (ii) an impact on global disinflation larger than expected from synchronized monetary policy tightening. 14. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 15. The Committee unanimously evaluated that the evolution of the scenario since the previous meeting has given the necessary confidence to start a gradual cycle of monetary easing. This evaluation involved different dimensions. Firstly, it was emphasized the positive behavior of inflation expectations following the setting of the target by the CMN and the announcement of the change to a continuous target system. The reduction of inflation expectations, as well as of break-even inflation rates, reduces the cost of disinflation and impacts the ex-ante real interest rate of the economy, as previously alerted by Copom. Secondly, headline inflation measures registered a clear improvement, while services inflation continues decelerating at the margin. Some members emphasized the recent dynamics, while others emphasized that the underlying fundamentals for the dynamics of services inflation do not allow yet to convincingly extrapolate the recent benign behavior. Regarding the output gap, some members noted the upward revision in its estimate, and the Committee discussed the implications of alternative output gap measures from other models and their respective impacts on projections. Finally, it was observed that the partial reanchoring of expectations contributed to reducing projections in the reference scenario. However, this movement was counterbalanced by updating some variables in the reference scenario that affect estimates and projections of the output gap, so that inflation projections did not differ significantly from those of the previous meeting. After the scenario evaluation, all members agreed that it was appropriate to reduce the Selic rate in this meeting. 16. During the debate, the Committee judged that both the options of reducing the Selic rate by 0.25 percentage point or 0.50 percentage point had merit, reinforcing that, whatever the decision, there was a consensus that a scenario with inflation expectations with only a partial reanchoring, core inflation still above the target, services inflation still above the level compatible with the inflation target, and resilient economic activity requires a more conservative stance throughout the cycle of monetary policy easing. Moreover, both options, depending on the cycle undertaken, would be consistent with the convergence of inflation to the target in the Copom’s reference scenario and in other scenarios discussed in the meeting. 17. One group was in favor of a more parsimonious interest rate reduction. For this group, the Committee’s signaling itself already emphasized the caution and parsimony inherent to this scenario and, according to these members, no relevant changes had been observed either in the scenario or in Copom's projections that justified the re-evaluation of this signaling. Other group considered that the monetary policy stance at a significantly contractionary degree allows the start of the cycle already at the moderate pace considered for the next meetings, without compromising the commitment to achieve the target and the credibility of monetary policy. This group emphasized that some events observed since the previous meeting, as the recent inflation dynamics more benign than expected, the partial reanchoring relatively fast after the CMN’s target setting, and the adequacy of recalibrating the real interest rate in view of the inflation expectations movements. 18. Regarding the next steps, Copom members unanimously anticipated cuts of 0.50 percentage point in the next meetings and judged that this pace is appropriate to keep the necessary contractionary monetary policy for the disinflationary process. This pace brings together, on the one hand, the firm commitment with the reanchoring of expectations and the disinflationary dynamics and, on the other hand, the adjustment in the level of monetary tightening in real terms in face of the more benign dynamics of the anticipated inflation in the reference scenario projections. Copom also evaluated that there is no evidence of an ongoing monetary tightening beyond that necessary for the inflation convergence to the target, and the scenario still calls for caution, reinforcing the view of serenity and moderation that Copom has expressed. The Committee judges that there is low probability of an additional intensification in the pace of adjustment, since this would require substantial positive surprises that would raise even further the confidence in the prospective disinflationary dynamics. Such confidence would arise only with a significant change in the fundamentals of inflation dynamics, such as a much more solid reanchoring of expectations, a sharp widening of the output gap, or a services inflation dynamics substantially more benign than the expected. 19. Finally, the Committee debated the extension of the monetary policy adjustments cycle. Copom analyzed the projections in the reference scenario, in a scenario of an interest rate reduction of 0.50 percentage point in this meeting, and in alternative scenarios that reflected the balance of risks. It was emphasized, in this analysis, the need to maintain a still contractionary monetary policy in the relevant horizon to consolidate the inflation convergence to the target and the anchoring of expectations. Copom emphasized that the extension of the cycle over time will depend on the inflationary dynamics, especially the components that are more sensitive to monetary policy and economic activity, on inflation expectations, in particular the longer-term ones, on its inflation projections, on the output gap, and on the balance of risks. The Committee maintains its firm commitment to the convergence of inflation to the target in the relevant horizon and reinforces that the extension of the cycle will reflect the BCB’s legal mandate. 20. Considering the assessed scenarios, the balance of risks, and the broad array of available information, Copom decided to reduce the Selic rate by 0.50 percentage point, to 13.25% p.a., and judges that this decision is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes the year of 2024 and, to a lesser extent, 2025. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and fostering full employment. 21. The Committee reinforces the need to persist on a contractionary monetary policy until the disinflationary process consolidates and inflation expectations anchor around its targets. 22. Copom considered the alternative option to reduce the Selic rate to 13.50%, but it concluded that it was appropriate to adopt a 0.50 percentage point pace in this meeting due to an improvement in the inflation dynamics, reinforcing however the firm objective of keeping a contractionary monetary policy to reanchor expectations and bring inflation to the target in the relevant horizon. The current context, characterized by a stage in which the disinflationary process tends to be slower and with partial reanchoring of inflation expectations, requires serenity and moderation in the conduct of monetary policy. If the scenario evolves as expected, the Committee members unanimously anticipate further reductions of the same magnitude in the next meetings, and it judges that this pace is appropriate to keep the necessary contractionary monetary policy for the disinflationary process. The Committee emphasizes that the total magnitude of the easing cycle throughout time will depend on the inflation dynamics, especially the components that are more sensitive to monetary policy and economic activity, on inflation expectations, in particular the longer-term ones, on its inflation projections, on the output gap, and on the balance of risks. 23. The following members of the Committee voted a reduction of 0.50 percentage point: Roberto de Oliveira Campos Neto (Governor), Ailton de Aquino Santos, Carolina de Assis Barros, Gabriel Muricca Galípolo, and Otávio Ribeiro Damaso. The following members voted for a reduction of 0.25 percentage point: Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, and Renato Dias de Brito Gomes.
br	copom_minutes_20200318.txt
br	copom_minutes_20230621.txt	1. The global environment remains challenging. Despite some attenuation on the stress involving banks in the US and Europe and the limited contagion on financial conditions so far, the situation still requires monitoring. It is noticeable, however, a tightening in the US credit markets with still uncertain impacts but with a negative bias for the economic growth. 2. At the same time, the central banks of major economies remain committed to bringing inflation back to its targets, in an environment in which inflation has been resilient. Recent inflation readings from several countries point to some stabilization of core inflation at levels above their targets and reinforce the persistent nature of the current inflationary process. Furthermore, it has been recently observed the resumption of the cycle of interest rate hikes in some economies that, in their majority, signal a prolonged period of high interest rates to fight inflationary pressures, which calls for greater caution in the conduct of economic policies also by emerging countries. 3. Regarding the domestic scenario, the recent set of indicators suggests a scenario of gradual deceleration. The release of the GDP for the first quarter of 2023 surprised positively, with most of the surprise reflecting the agricultural performance, but with less dynamism in the more cyclical economic sectors. The labor market, which surprised positively throughout 2022, has shown some resilience, with a net increase in job creation and relative stability in the unemployment rate. However, a reduction in the participation rate was observed. 4. Consumer inflation has been reduced in the recent period, with emphasis on the dynamics in industrial goods and food. The inflation of the components more sensitive to the economic cycle and the monetary policy, which present greater inflationary inertia, showed an incipient improvement, but remain above the range compatible with meeting the inflation target. Inflation expectations for 2023 and 2024 collected by the Focus survey have reduced and are around 5.1% and 4.0%, respectively. 5. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 4.852 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “green” in December 2023 and 2024. In this scenario, Copom’s inflation projections stand at 5.0% for 2023 and 3.4% for 2024. Inflation projections for administered prices are 9.0% for 2023 and 4.6% for 2024. 6. Following the extensive debate and based on the accumulated evidence over recent meetings, the Committee opted to increase the estimated neutral real interest rate from 4.0% p.a. to 4.5%. Copom members evaluated the different factors that justify an increase and converged on the conclusion that there was a rise in the neutral rate. Among the mentioned factors that support the increase of the neutral interest rates are the likely increase of neutral interest rates in the major economies, the resilience in the Brazilian economic activity jointly with a slow disinflationary process, as well as an analysis of supporting models that incorporate different methodologies. 7. The Committee evaluates that the international outlook is somewhat more favorable for the inflationary process in Brazil, but the low degree of slack in the labor market in some economies and the current inflation persistently high and widespread in the services sector suggest that inflationary pressures should take long to dissipate. However, some factors might reduce external inflationary pressures. First among these is the commitment of central banks to the control of inflation by maintaining tighter financial conditions for a longer period. Such determination, albeit with a likely impact upon domestic asset prices in the short term, coupled with a credit slowdown in major economies, contributes to a more credible and lasting global disinflationary process. Besides, the recent dynamics of the exchange rate and international commodity prices, although with greater volatility, also contribute to slowdown international pressures. 8. Brazilian activity data, in particular the release of the GDP growth for the first quarter of 2023, continues to indicate a deceleration in the sectors most sensitive to the economic cycle. At the margin, the pace of growth was moderate, except for the strong growth of the agricultural sector. In any case, it is anticipated that after this greater growth in the agricultural sector in the first quarter has passed – due to the seasonality of the harvest – the process of moderating growth in the more cyclical sectors of the economy will deepen over the following quarters. 9. The Committee debated the recent labor market data. On the one hand, formal employment data continued to reveal increase in job creation in the most recent period. On the other hand, the unemployment rate remains relatively stable, but with a lower participation rate than in the pre-pandemic period. The Committee discussed the possible reasons for the fall in the participation rate, evaluating whether this movement should be read as structural or cyclical, which would have different impacts on the participation rate in effect in the long term. Some members noted that the recent process towards a partial recomposition of losses in real wages moves forward. This movement is expected and has been accompanied by a deceleration in nominal gains, which is expected to intensify ahead. 10. The Committee believes that the disinflation dynamics is still characterized by a process with two distinct stages. In the first stage, already completed, the speed of disinflation was greater, with a greater effect on administered prices and an indirect effect on market prices through less inertia. In the second stage, which is currently observed, the speed of disinflation is slower, and core inflation – which is more affected by the aggregate demand and the interest rate policy – declines at a slower pace, responding to the output gap and future inflation expectations. The Committee reaffirms that the disinflation process at its current stage demands serenity and patience in the conduct of monetary policy to ensure the convergence of inflation to its targets. 11. Still in the discussion about inflationary behavior, the recent benign behavior of wholesale prices was emphasized, both for food and industrial goods. On the food front, logistical issues, together with favorable weather and a good harvest contributed to a revision in the outlook for food prices for 2023 and, to a lesser extent, for 2024. For the latter, however, the uncertainty about the impact of the El Niño phenomenon stands out. Regarding industrial goods, wholesale prices, as well as the normalization of supply chains, have also led to a revision in the dynamics of these sectors. The Committee assesses that the consolidation of such dynamics contributes to the disinflationary process and should have some indirect impact on the other items. In terms of the trajectory of consumer inflation over 2023, it should be noted that the continuity of the drop is expected in the twelve-month inflation during this second quarter, due to the base effect of the previous year. For the second half of 2023, however, a higher twelve-month inflation is expected, as a consequence of the exclusion in this indicator of the effect of the tax measures that reduced the price level in the third quarter of 2022 and of the maintenance of the effects of this year's tax measures. Copom emphasizes that it will also continue to monitor inflationary dynamics in underlying inflation measures, which best reflect the current inflation trend as well as its prospects. 12. Inflation expectations remain deanchored from the targets set by the National Monetary Council, with a small reduction of the deanchoring at the margin. The Committee continues to assess that deanchored expectations raise the cost of bringing inflation back to the target. It was emphasized again that the behavior of expectations is a fundamental aspect of the inflationary process since it serves as a guide for present and future prices and wages setting. Thus, as expectations rise, there is a greater upward pressure on prices in the current period and the inflationary process is fueled by these expectations. It was also highlighted that the anchoring of expectations is a key factor for price stability. In this context, the Committee reinforces that decisions that induce the reanchoring of expectations and that raise confidence in inflation targets would contribute to a faster and less costly disinflation process, allowing monetary easing. 13. The domestic credit granting scenario is compatible with the current stage of the monetary policy cycle. The Committee anticipates a moderation in credit granting over the next few months, but in line with what has been observed in previous monetary policy tightening cycles. The Committee stresses that the BCB has the appropriate and necessary liquidity instruments, associated with macroprudential policy, to deal with relevant frictions in the system, should they occur. 14. The Committee also discussed the impacts of the fiscal scenario on inflation and assesses that the presentation and processing of the fiscal framework have substantially reduced the uncertainty surrounding fiscal risk. Challenges to meet the targets set for the primary result remain, although in the Committee's discussion, the commitment and the presentation of measures to achieve these results were emphasized. Copom again emphasized that there is no mechanical relationship between the convergence of inflation and the approval of the fiscal framework since the inflation path is conditional on the reaction of inflation expectations and financial conditions. 15. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; (ii) some residual uncertainty about the final fiscal framework to be approved by the National Congress and, more relevant for monetary policy, its impacts on the expected paths of the public debt and of inflation expectations, and on risky assets; and (iii) a larger or more persistent deanchoring of long-term inflation expectations. Among the downside risks, it should be noted (i) an additional reduction in the prices of international commodities measured in local currency, even though a sizable portion of this movement has already been observed; (ii) a greater than projected deceleration of global economic activity, particularly due to adverse conditions in the global financial system; and (iii) a slowdown in domestic credit concession larger than what would be compatible with the current stance of monetary policy. 16. Copom then discussed the conduct of monetary policy, considering the set of projections analyzed, as well as the balance of risks for prospective inflation. 17. The Committee judges that the current context, marked by unanchored expectations for longer terms and characterized by a stage of the disinflationary process that tends to be slower, requires parsimony and caution in the conduct of monetary policy. 18. The Committee unanimously believes that flexibilization of the degree of monetary tightening requires confidence in the trajectory of the disinflation process, since premature flexibilization could lead to a reacceleration of the inflationary process and, consequently, to a reversal of the monetary easing process itself. The materialization of this type of scenario can negatively impact not only the credibility of monetary policy, but also the financial conditions. 19. In this debate, a divergence was observed in the Committee concerning the degree of signaling regarding the next steps. The prevailing assessment was that the continuation of the ongoing disinflationary process, with its consequent impact on expectations, may allow the necessary confidence to be built up to start a parsimonious process of inflection at the next meeting. Another group was more cautious, emphasizing that the disinflationary dynamics still reflects the retreat of the most volatile components and that the uncertainty about the output gap creates doubt about the impact of the monetary tightening implemented so far. For this group, it is necessary to observe further reanchoring of long-term expectations and accumulate more evidence of disinflation in the more cyclically sensitive components. However, the Committee members unanimously agreed that the future steps of monetary policy will depend on the inflationary dynamics, especially the components that are more sensitive to monetary policy and economic activity, on inflation expectations, in particular the longer-term ones, on its inflation projections, on the output gap, and on the balance of risks. 20. Following the usual analysis, the Committee discussed the different determinants that impact the conduct of the monetary policy. Listing the determinants analyzed in the meeting, there was no major change in the forward-looking output gap scenario, where the gap is projected to open slowly. Resilience of the economic activity in the first quarter was discussed, but the Committee's view remains that growth was driven by the agricultural sector and that the other sectors should show modest growth throughout 2023. As for services inflation and core inflation a slow deceleration movement is observed, in line with the non-linear process anticipated by the Committee. In addition, inflation expectations declined slightly, but remain deanchored, partially due to the questioning about a possible change in future inflation targets. The Committee believes that decisions that reanchor expectations can lead to faster disinflation. Copom's inflation projections have been reduced, especially in the relevant scenario, to a large extent due to lower inflation expectations. Finally, on the balance of risks, the Committee assesses that uncertainty about the final design of the fiscal framework is residual. Besides this, it noted that part of the downward risk coming from commodity prices has already materialized in the recent period. 21. Considering the assessed scenarios, the balance of risks, and the broad array of available information, Copom decided to maintain the Selic rate at 13.75% p.a. and judges that this decision is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes the year of 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and fostering full employment. 22. The current context, characterized by a stage in which the disinflationary process tends to be slower and in an environment of deanchored inflation expectations continues to require caution and parsimony. Copom reaffirms its commitment to set monetary policy to meet the targets and judges that the strategy of maintaining the Selic rate for a long period has been adequate to ensure the convergence of inflation. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee judges that the current scenario demands patience and serenity in the conduct of monetary policy and reminds that the future steps of monetary policy will depend on the inflationary dynamics, especially the components that are more sensitive to monetary policy and economic activity, on inflation expectations, in particular the longer-term ones, on its inflation projections, on the output gap, and on the balance of risks. 23. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza and Renato Dias de Brito Gomes.
br	copom_minutes_20220803.txt	1. The global environment remains adverse and volatile, with marked downward revisions on prospective global growth in an environment of inflationary pressures. 2. The growth of major economies has been revised down for 2022 and 2023 due to the expected reversal of the stimuli implemented during the long pandemic period, in particular, those of monetary policy. Furthermore, the war in Ukraine impacts the supply of natural gas, thus bringing additional uncertainty to the European economic scenario, whereas, in China, the deterioration of the real estate sector, coupled with the policy to fight Covid-19, negatively impact the country’s growth prospects. 3. Inflation rates figures in some advanced economies released in the period suggest the persistence of strong pressures, although an incipient normalization in the supply chains and accommodation in the prices of leading commodities is already observed recently. Coupled with the adjustment of inventories of industrial goods, these developments might imply the moderation of inflationary pressures related to goods. On the other hand, the degree of slack in the labor market in these economies suggests that inflationary pressures in the sector of services might take long to dissipate. 4. Central banks in developed and emerging countries have adopted a more contractionary stance against increased inflation. The acceleration in the process of normalization of monetary policy in advanced economies, the increase in risk aversion, and the change in the growth outlook have impacted financial conditions in both advanced and emerging economies, affecting the volatility of assets and economic growth prospects. The Committee continues monitoring the risks involving a global deceleration in a highly pressured inflationary environment. 5. Turning to the Brazilian economy, the set of indicators released since the previous Copom meeting continues to suggest that the economy grew throughout the second quarter, with the labor market recovery stronger than expected by the Committee. Indicators related to both formal job openings and employment and unemployment rates suggest a rapid normalization in the labor-intensive sectors after the pandemic. 6. Consumer inflation remains high, with increases spread among several components, and continues to be more persistent than anticipated. The reduction of taxes on energy prices is already observed in high frequency indicators, although the components more sensitive to the economic cycle and monetary policy, with higher inflationary inertia, continue above the range compatible with meeting the inflation target. Inflation expectations for 2022, 2023, and 2024 collected by the Focus survey are around 7.2%, 5.3%, and 3.3%, respectively. 7. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.302 and evolves according to the purchasing power parity (PPP). This scenario assumes a path for the Selic rate that ends 2022 at 13.75% p.a., falls to 11.00% in 2023 and to 8.00% in 2024. The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be "yellow" in December 2022, 2023, and 2024. In this scenario, Copom's inflation projections stand at 6.8% for 2022, 4.6% for 2023, and 2.7% for 2024. Inflation projections for administered prices are -1.3% for 2022, 8.4% for 2023, and 3.6% for 2024. The projections based on the reference scenario incorporate the tax measures recently approved. For the six-quarter-ahead horizon, which mitigates the calendar-year impact but incorporates the second-round effects of the tax measures that occur in 2022 and the first quarter of 2023, the 12-month inflation projection stands at 3.5%. The Committee judges that the uncertainty in its assumptions and projections is higher than usual. 8. The Committee evaluates that the global inflationary scenario is still challenging. Pressures stemming from both persistently high demand for goods, as well as supply shocks linked to the war in Ukraine, China's Covid-19 policy, and policies restricting trade in agricultural products in commodity-producing countries, might have long-term consequences and lead to more persistent inflationary pressures. However, the re-evaluation of future global demand has led to price declines of leading commodities as well as the prospects of reduced imbalance in the industrial goods market. Copom, even so, reiterates that some geopolitical and particular issues in these markets still deserve attention. 9. The Committee discussed the impacts of the global synchrony in the process of stimulus withdrawal. Copom noticed a more accelerated pace in the process of monetary policy adjustment in advanced economies, as well as the commitment stated in the communication of major central banks to reduce inflationary pressures. It was observed that this movement elevated the market volatility, unevenly impacting several assets and increasing risk aversion. In addition, given the persistence of the inflationary process in advanced economies and the consequent responses by several central banks, the Committee evaluates that the probability of alternative scenarios incorporating a sharper deceleration of global economic activity increased. The uncertainty about the energy scenario in Europe, the dynamics of sectors more sensitive to interest rates in the United States, and the prospects of a more gradual growth in China contribute to this scenario. 10. In the domestic scenario, Copom evaluates that temporary policies aimed to support income could provide stimulus to aggregate demand and the extension of these policies might increase the country’s risk premia and inflation expectations as they pressure aggregate demand and worsen the fiscal trajectory. The Committee reiterates that there are several channels by which fiscal policy may affect inflation, including its effect on activity, asset prices, and inflation expectations. 11. Labor market data, especially concerning the pace of job openings and the unemployment rate, surprised in the period and indicate a faster-than-anticipated narrowing of the estimate of the output gap. However, the Committee evaluates that economic slackness persists. Nevertheless, it is noteworthy that evaluations about the output gap, especially about the component related to the labor market, are always subject to uncertainty, notably in the current situation in which the economy is still normalizing after the pandemic and with remarkable heterogeneity across sectors in this process. Copom will continue monitoring and evaluating the output gap in the next releases. The Committee still considers that activity should decelerate in the coming quarters when the lagged impacts of monetary policy will be more strongly felt. 12. It emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; and (ii) an increase in the risk premium due to the uncertainty about the country's future fiscal framework and additional fiscal stimuli that support aggregate demand, partially incorporated in inflation expectations and asset prices. Among the downside risks, it should be noted (i) a possible reversion, even if partial, of the increase in the price of international commodities measured in local currency; and (ii) a greater deceleration of economic activity than projected. The Committee assesses that the possibility that fiscal policies that support aggregate demand become permanent heightens the upside risks of the inflationary scenario. On the other hand, the Committee notes that the rising risk of a greater global deceleration increases the downside risks to inflation. The Committee assesses that the still uncertain and volatile current scenario requires serenity when evaluating the prospective risks. 13. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 14. Following its usual governance, the relevant horizon for monetary policy now refers to the year 2023, and, to a lesser extent, 2024. However, at this meeting, the Committee noted that inflation projections for the years of 2022 and 2023 were heavily impacted by temporary tax measures across calendar years. Therefore, the Committee decided to emphasize the projections for 12-month inflation in the first quarter of 2024, which reflects the relevant horizon, smoothens out the primary effects from tax changes, but incorporates their second-round effects on the relevant inflation projections for monetary policy decisions. 15. The 12-month inflation projection for the first quarter of 2024 – which incorporates the secondary effects of the tax changes as well as the cumulative effects of keeping interest rates at a significantly contractionary level – is consistent with the strategy of inflation convergence to around the target over the relevant horizon. The Committee noted that inflation projection for 2024 is also around the target. 16. Copom opened the discussion by evaluating the adjustment cycle carried out up to this meeting. It was emphasized that the current monetary tightening cycle was quite intense and timely and that, due to the long and variable monetary policy lags, much of the expected contractionary effect and its impact on current inflation are still to be seen. These impacts should become clearer in the activity indicators for the second half of the year, but the Committee anticipates that measures to sustain aggregate demand, which will be implemented in the short term, may make it difficult a more precise evaluation about the stage of the economic cycle and the impacts of monetary policy. 17. The Committee noted that the short-term inflationary dynamics remains challenging, with increasing core inflation measures in an environment of surprises in current activity, and that its projections continued to deteriorate, even though the scenario is surrounded by uncertainty and volatility above the usual. It was emphasized that the rise in expectations and medium-term projections was concentrated in the inflation of administered prices, due to the temporary nature of some tax measures. 18. The Committee assessed, based on the projections used and on its balance of risks, that the strategy required to bring the projected inflation to around the target for the relevant horizon required that the monetary tightening cycle continued to move significantly further into contractionary territory, with an additional adjustment at this meeting and the maintenance of the interest rate in significantly contractionary territory for a sufficiently extended period. 19. Copom then debated the monetary policy options for this meeting. The Committee concluded that a further adjustment of 0.50 p.p. was appropriate in an environment of high uncertainty, despite the already significantly contractionary stage of monetary policy, which, considering its lags, should affect the economy more strongly as of the second half of 2022. 20. The Committee decided to signal that it will assess the need for a smaller residual adjustment at the next meeting, with the aim of bringing inflation to around the target in the relevant horizon. Moreover, given the persistence of recent shocks, the Committee will remain vigilant and will assess whether the prospect of maintaining the Selic rate by itself for a sufficiently long period will ensure such a convergence. This strategy was deemed more appropriate to ensure the convergence of inflation over the relevant horizon, as well as the anchoring of longer-term inflation expectations, while reflecting the already implemented monetary tightening, reinforcing the cautious monetary policy stance, and emphasizing the uncertainty of the scenario. 21. Taking into account the assessed scenarios, the balance of risks, and the broad array of available information, Copom unanimously decided to increase the Selic rate by 0.50 p.p. to 13.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks and is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023 and, to a lesser extent, 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 22. The Committee considers that, given its inflation projections and the risk of a deanchoring of long-term expectations, it is appropriate to continue advancing in the process of monetary tightening significantly into even more restrictive territory. The Committee emphasizes that it will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate. 23. The Committee will evaluate the need for a residual adjustment, of lower magnitude, in its next meeting. The Copom emphasizes that it will remain vigilant and that future policy steps could be adjusted to ensure the convergence of inflation towards its targets. It also stresses that the uncertainty of the current scenario, both domestic and foreign ones, coupled with the advanced stage of the current monetary policy cycle, and its cumulative impacts yet to be observed, require additional caution in its actions. 24. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza, and Renato Dias de Brito Gomes.
br	copom_minutes_20210120.txt	1. Regarding the global outlook, the increase in the number of cases and the emergence of new virus strains are reverting previous mobility gains and should affect short-term activity. However, new fiscal stimulus in some developed countries and the rollout of COVID-19 immunization programs should promote a solid economic recovery in the medium term. Economic slack and communication of central banks of major economies suggest that monetary stimuli will last long, resulting in a favorable environment for emerging economies. 2. Turning to the Brazilian economy, indicators regarding growth at the end of last year have been better than expected, but they do not capture the effects of the recent increase in the number of COVID-19 cases. Prospectively, uncertainty about economic growth remains larger than usual, especially for the first quarter of this year, concurrently with the expected unwinding of the emergency transfer programs. 3. The various measures of underlying inflation are in levels above the range compatible with meeting the inflation target. 4. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 3.4%, 3.5%, and 3.25%, respectively. 5. The recent increase in commodities prices and its effects on food and fuel prices imply an increase in inflation forecasts for the next months. In spite of the stronger short-term inflationary pressure, the Committee maintains the diagnosis that the current shocks are temporary, although more persistent than expected. Hence, the Copom continues to closely monitor the evolution of inflation, in particular core inflation readings. 6. The Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at R$5.35/US$2, and evolving according to the purchase power parity (PPP), stand around 3.6% for 2021 and 3.4% for 2022. This scenario assumes a path for the Selic rate that ends 2021 at 3.25% p.a. and rises to 4.75% p.a. in 2022. In this scenario, inflation projections for administered prices are 5.1% for 2021 and 3.0% for 2022. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, economic slack may continue to produce a lower-than-expected prospective inflation trajectory, especially when this slack is concentrated in the service sector. This risk increases if a slower reversion of the pandemic effects lengthens the environment of high uncertainty and precautionary savings. 9. On the other hand, an extension of fiscal policy responses to the pandemic that aggravates the fiscal path or a frustration with the continuation of the reform agenda may increase the risk premium. The relative increase in the risks of these events implies an upward asymmetry to the balance of risks, i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 10. Regarding the international environment, the Committee assessed that, on the one hand, the emergence of new variants of the virus and recent discussions about reflation in the USA are, respectively, new sources of risk for economic activity and asset prices in emerging countries. On the other hand, this risk is counterbalanced by the rollout of extensive immunization programs against the COVID-19, new fiscal stimuli in some developed countries and the communication of central banks of major economies that monetary stimuli will last long. The Committee judged that, for now, the result of this set of factors is a favorable environment for emerging economies. 11. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They evaluated that, despite the partial reduction in governmental transfer programs, available data for the end of last year have been positively surprising. However, these data do not capture the effects of the recent increase in the number of COVID-19 cases. Prospectively, the unpredictability associated with the pandemic developments, and the necessary adjustment in government spending from 2021 on, increases the uncertainty about the economic recovery. The Committee considers that the risks associated with both the pandemic developments and the expected unwinding of the emergency transfer programs may lead to a domestic scenario characterized by more gradualism or even a temporary reversal of the economic recovery. 12. The Copom members debated on the level of economic slack. The Committee believes that the pandemic continues to have heterogeneous effects on different economic sectors. The transfer programs from the government have reduced slack in the goods sector. Service activities, however, especially those most directly affected by social distancing, face a greater reduction in demand. Prospectively, the evolution of these sectoral gaps will depend on the pandemic developments and on the adjustment in public spending. Some members of the Committee pointed out that labor market data on the formal sector suggest that the overall economic slack has reduced more rapidly than expected. Most members, however, felt that other labor market data did not support this conclusion. 13. Next, the Committee discussed the implementation of monetary policy. According to the forward guidance introduced since its 232nd meeting the Copom would not reduce the monetary stimulus as long as three conditions were met. The Copom has evaluated that two of these conditions still hold: the fiscal regime has not changed, and long-term inflation expectations remain anchored. However, the Committee judges that the third condition no longer holds, as inflation expectations, as well as inflation projections for its baseline scenario, are sufficiently close to the inflation target over the relevant horizon for monetary policy. As a consequence, the Committee decided to drop its forward guidance. Henceforth, monetary policy will follow the usual analysis of the balance of risks for the prospective inflation. 14. The Copom continued its analysis, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, inflation projections are around the target in the relevant horizon. The Committee also considered that fiscal risks generate an upward bias in these projections, potentially justifying an increase in policy rates earlier than that assumed in its baseline scenario. 15. The Copom members discussed the impact of this asymmetry in the balance of risks in the appropriate degree of monetary stimulus. In particular, some members questioned whether it would still be appropriate to maintain an extraordinarily high degree of stimulus, given the normalization of the economic activity observed in recent months. Since the May 2020 Copom meeting, when the desired degree of monetary stimulus was characterized as "extraordinary", there has been a reversal on the disinflationary shock that occurred in the first months of the year, a reversal of the downward trend on inflation expectations and a decline on economic slack, bringing inflation projections on the baseline scenario closer to its target in the relevant horizon. Therefore, these members believe that the Copom should consider starting a process of partial normalization, reducing the "extraordinary" degree of monetary stimuli. 16. Lastly, the Committee concluded that despite some normalization in economic activity, uncertainty regarding the future dynamics of main economic variables remains above the usual. The next data release will be very informative about the evolution of the pandemic, economic activity, and fiscal policy. Thus, the benefits of waiting for these releases to decide on the next steps of monetary policy outweigh the costs. For this reason, at this time the Copom deemed it appropriate to maintain the extraordinarily high degree of monetary stimulus. 17. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to maintain the Selic rate at 2.00% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2021 and, mainly, 2022. 18. The Committee believes that persevering in the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic recovery. The Copom also stresses that uncertainty regarding the continuation of the reform agenda and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 19. According to the forward guidance introduced in its 232nd meeting the Copom would not reduce the monetary stimulus as long as specified conditions were met. Based on new information, the Committee judges that those conditions no longer hold, as inflation expectations, as well as inflation projections for its baseline scenario, are sufficiently close to the inflation target over the relevant horizon for monetary policy. Therefore, the forward guidance no longer holds and, henceforth, monetary policy will follow the usual analysis of the balance of risks for the prospective inflation. 20. The Copom reiterates that the removal of the forward guidance does not mechanically imply interest rates increases, since, at this moment, uncertainties regarding the evolution of growth still prescribe an extraordinarily strong monetary stimulus. 21. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Feitosa Nechio, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso and Paulo Sérgio Neves de Souza.
br	copom_minutes_20210804.txt	1. Regarding the global outlook, the evolution of the Covid-19 Delta variant adds risk to the recovery of the world economy. The Committee considers that, in spite of the recent movements in the yield curves, there is still a relevant upward inflation risk in the central economies. Nevertheless, the environment for emerging economies remains favorable with the long-lasting monetary stimuli, with the fiscal programs, and with the reopening of the major economies. 2. Turning to the Brazilian economy, recent indicators continue evolving satisfactorily and do not call for relevant revisions in growth forecasts, which display a robust economic recovery during the second half of the year. 3. The various measures of underlying inflation are above the range compatible with meeting the inflation target. 4. Inflation expectations for 2021, 2022, and 2023 collected by the Focus survey are around 6.8%, 3.8%, and 3.25%, respectively. 5. Consumer inflation has been persistent. Recent indicators show a worse composition. It is noteworthy the surprise with the underlying services inflation and the continuing pressure on industrial goods, which cause core measures to rise. Furthermore, there is new pressure in volatile components, such as the possible additional increase in electricity fares and food prices, both due to adverse weather conditions. Altogether, these factors imply significant revisions in short-term forecasts. 6. The Copom's inflation projections in its baseline scenario, with interest rate path extracted from the Focus survey and exchange rate starting at USD/BRL 5.152, and evolving according to the purchase power parity (PPP), stand around 6.5% for 2021, 3.5% for 2022 and 3.2% for 2023. This scenario assumes a path for the Selic rate that rises to 7.0% p.a. in 2021, remains at this level during 2022 and drops to 6.5% p.a. during 2023. In this scenario, inflation projections for administered prices are 10.0% for 2021 and 4.6% for 2022 and 2023. The energy flag is assumed to be neutral, remaining at "red level 1" in December each year. 7. The Copom’s baseline scenario for inflation encompasses risk factors in both directions. 8. On the one hand, a possible reversion, even if partial, of the recent increase in the price of international commoditiesmeasured in local currency would produce a lower-than-projected inflation in the baseline scenario. 9. On the other hand, further extensions of fiscal policy responses to the pandemic that increase aggregate demand and deteriorate the fiscal path may pressure the country's risk premium. Despite the recent improvement of debt sustainability indicators, the elevated fiscal risk creates an upward asymmetry in the balance of risks,i.e., in the direction of higher-than-expected paths for inflation over the relevant horizon for monetary policy. 10. Regarding the global outlook, the Committee assessed that the fiscal and monetary stimuli are promoting robust growth and that, henceforth, inflation dynamics in central and emerging economies should increasingly depend on demand channels. In this regard further discussions about the risk of a lasting inflation increase in the United States and the associated repricing of financial assets could turn the environment for emerging economies challenging. 11. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They considered that the latest available data continues to evolve positively, in line with growth forecasts. In the Committee’s view, the second half of the year should bring a robust recovery, as the effects of the vaccination are felt more broadly. The Committee noticed that the median of growth forecasts in the Focus survey is appreciably more optimistic than those of its baseline scenario and pondered whether the difficulties related to seasonal adjustments due to the pandemic shock would explain this divergence. 12. The Copom members then debated the level of economic slack. Although the economic slack as a whole is quickly returning to the late 2019 level, the Committee considered that the pandemic still produces heterogeneous effects on economic sectors and, in particular, on the labor market, with consequences for the recent and prospective dynamics of inflation. 13. Next, the Copom discussed the implementation of monetary policy, considering not only the baseline scenario, but also the balance of risks for inflation. According to the baseline scenario, which uses the interest rate path extracted from the Focus survey, the exchange rate at purchasing power parity, and commodity prices in USD stable in real terms, the inflation projections are aligned to the targets for 2022 and 2023. The Committee judged that the fiscal risks continue to imply an upward bias in the projections. This asymmetry in the balance of risks affects the appropriate degree of monetary stimulus, thus justifying a path for monetary policy that is more restrictive than the one used in the baseline scenario. 14. Copom then evaluated different tightening paths for monetary policy. Considering the baseline scenario and the balance of risks, the Committee assessed that – should there be no changes in the inflation conditioning factors – subsequent uninterrupted interest rate increases are required up to a level above the neutral rate, to obtain projections around the inflation targets in the relevant horizon. Therefore, a tightening cycle of the policy rate to a level consistent with restrictive monetary policy has become appropriate. The Committee opted to communicate this decision, maintaining transparency about the monetary policy path implied in its projections, and reaffirming that this view will be systematically reassessed as changes in inflation determinants or in the balance of risks occur. 15. The Committee discussed potential explanations for the difference between its baseline scenario’s projections and the inflation expectations extracted from the Focus survey. First, expectations may incorporate different assumptions about the determinants of inflation, such as administered prices and economic growth, as well as contain different perceptions on risk or alternative scenarios. Second, the long sequence of shocks and one-way revisions of expectations may increase the perception of inflationary inertia. Finally, market participants may have different assumptions about the reaction function of monetary policy. 16. As a result, Copom evaluated that the recent worsening in inertial components of inflation, amid the reopening of the service sector, could cause a further deterioration in inflation expectations, raising the costs for its future convergence. The Committee felt that it should once again underscore its unequivocal commitment to the pursuit of its inflation targets over the relevant horizon for monetary policy, guided by its baseline scenario as well as its assessment of the balance of risks. 17. Finally, Copom concluded that a quicker adjustment of monetary policy is the most appropriate strategy at this time to assure the convergence of inflation to its targets for 2022 and 2023. 18. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, Copom unanimously decided to increase the Selic rate by 1.00 p.p. to 5.25% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2022 and, to a lesser extent, 2023. The adjustment also reflects the Committee’s perception that the recent deterioration of inertial components of inflation, in a moment of reopening of the service sector, could result in an additional deterioration of inflation expectations. The Committee understands that, at this moment, the strategy of a quicker monetary adjustment is the most appropriate to guarantee the anchoring of inflation expectations. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 19. At this moment, the Copom’s baseline scenario and the balance of risks indicate as appropriate a tightening cycle of the policy rate to a level above the neutral. 20. For the next meeting, the Committee foresees another adjustment of the same magnitude. Copom emphasizes that its future policy steps could be adjusted to ensure the achievement of the inflation target and will depend on the evolution of economic activity, on the balance of risks, and on inflation expectations and projections for the relevant horizon for monetary policy. 21. The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Carolina de Assis Barros, Fabio Kanczuk, Fernanda Magalhães Rumenos Guardado, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.
br	copom_minutes_20230322.txt	1. Since the previous meeting of the Monetary Policy Committee (Copom), the global environment has deteriorated. The episodes involving banks in the United States and Europe have increased the uncertainty and the volatility in markets and require monitoring. Major economies have emphasized the principle of separation of objectives and instruments in the conduct of monetary and macroprudential policies. 2. At the same time, recent data on global activity and inflation remain resilient and the process of monetary policy tightening in major economies continues to advance. The external environment continues to be marked by the prospect of global growth below potential, but the easing of the Covid policy in China, a milder winter in Europe and the possibility of a gradual US growth slowdown soften the ongoing global economic slowdown resulting from the tightening of financial conditions in the major economies. Conversely, the impact on financial conditions and consequently on global growth of the recent episodes involving the banking system in major economies is still uncertain but has a negative bias. Recent inflation readings point to some stabilization of core inflation in several countries at levels above their targets and reinforce the inertial nature of the current inflationary process. The inflationary environment remains challenging and the low degree of labor market slack in some economies, coupled with persistently high current inflation with a high degree of diffusion, suggests that inflationary pressures, particularly in the services sector, should last longer. 3. The process of normalization of monetary policy continues towards contractionary rates synchronized across countries. In several emerging economies, tightening cycles come to a halt or suggest they are nearing an end. In any case, most monetary authorities signal a prolonged period of high interest rates is necessary to fight inflationary pressures, which calls for greater caution in the conduct of economic policies also by emerging countries. 4. Turning to the Brazilian economy, the set of indicators released since the previous meeting still corroborates the scenario of slowdown in the growth expected by the Committee. A moderation is observed in the coincident indicators of activity and the credit market has also shown deceleration at the margin. The labor market, which surprised positively throughout 2022, continues to show signs of moderation, with relative stability in the unemployment rate, stemming from declines in the employed population and in the workforce. 5. Consumer inflation remains high. The inflation of the components more sensitive to the economic cycle and the monetary policy, which present greater inflationary inertia, remain above the range compatible with meeting the inflation target. Inflation expectations for 2023 and 2024 collected by the Focus survey are around 6.0% and 4.1%, respectively. 6. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.252 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “yellow” in December 2023 and 2024. In this scenario, Copom’s inflation projections stand at 5.8% for 2023 and 3.6% for 2024. Inflation projections for administered prices are 10.2% for 2023 and 5.3% for 2024. The Committee decided again to emphasize the six-quarter horizon ahead. On this horizon, which refers to the third quarter of 2024, the 12-month inflation projection stands at 3.8%. The Committee judges that the uncertainty in its assumptions and projections is higher than usual. 7. The Committee analyzed an alternative scenario with stable interest rates over the entire relevant horizon. In this scenario, inflation projections stand at 5.7% for 2023, 3.3% for the third quarter of 2024, and 3.0% for 2024. 8. The Committee again assessed the possibility of incorporating some increase in its estimate for the neutral interest rate, towards the movement observed in expectations for longer terms extracted from the Focus survey. The real neutral interest rate is the rate in which, in the absence of impact from other factors, the inflation rate remains stable, and the output grows according to its potential, reflecting productivity gains and changes in the structural fundamentals of the economy. At this point, the Committee decided to keep the neutral interest rate at 4% but evaluated alternative scenarios and identified that the impacts of an increase in the neutral rate on its projections grow over time and become more relevant as of the second half of 2024. 9. In assessing the factors that could lead to unfold an alternative scenario characterized by a higher neutral interest rate, emphasis was placed on the possible adoption of expansionary parafiscal policies, which can increase the neutral rate and reduce the power of monetary policy, as previously remarked by the Committee. 10. The Committee continues to assess that the global disinflation process, especially regarding underlying inflation indicators, is challenging and may be slower than what is usually observed, as inflation is widespread in the services segment. In this context, the reduction of inflationary pressures continues to require the commitment and determination of central banks with the control of inflation through a more prolonged tightening of financial conditions. Such determination, with a likely impact upon asset prices in the short term, contributes to a more credible and lasting global disinflationary process. 11. Since the previous Copom meeting, some regional banks were liquidated in the US and two large Swiss banks were merged, raising concerns about the banking system in the major economies. The Committee will continue to closely monitor this situation, analyzing possible contagion channels, but assesses that the direct impact on the domestic financial system and other emerging countries is, so far, limited, with no changes in the stability or efficiency of those financial systems. 12. The scenario, therefore, looks even more challenging for the conduct of monetary policy, with increased risks both around the inflationary scenario and in relation to financial stability. On the one hand, there are the episodes involving the banking sector and the consequent need to provide liquidity. On the other hand, global growth and inflation data remain resilient, requiring commitment and determination from the monetary authorities. The Committee believes that the best contribution of monetary policy continues to be in combating inflationary pressures and smoothing out economic fluctuations. In addition, some members emphasized that they do not see a dilemma in the conduct of monetary policy between its objective of inflation control and the objective of financial stability. The Committee stressed how the two objectives have specific instruments. 13. Brazilian activity data continue to indicate a more moderate pace of growth at the margin, and employment data suggest moderation. It was pointed out that after a period of strong recovery in the last two years, a process of deceleration of growth has begun in the durable goods sector, which had been particularly buoyant in the pandemic, and which is more sensitive to interest rate policy. The deceleration spread to the non-durable goods sector and, subsequently, to the services sector, although in a milder way. Copom continues to evaluate that the economic slowdown underway is necessary to guarantee the convergence of inflation to its targets, particularly after a prolonged period of inflation above the target. Finally, it was noted that the economic growth outlook has not changed significantly in the recent period. 14. As expected, given the greater lag in relation to the economic cycle, only recently has the labor market shown evidence of a moderate slowdown, compatible with the Committee's expectation of a moderation in the pace of economic activity. Some members have observed that there is a movement towards a partial recomposition of recent losses in real wages. This movement is expected and has been accompanied by a deceleration in nominal gains, which is expected to intensify ahead. 15. The Committee believes that the disinflation dynamics continues to be characterized by a process with two distinct stages. In the first stage, already completed, there is a greater speed of disinflation, with a greater effect on administered prices and an indirect effect on market prices through less inertia. In the second stage, which is currently observed, the speed of disinflation is slower and core inflation – which is more affected by the aggregate demand and the interest rate policy – is reduced at a slower pace, responding to the output gap and inflation expectations. It is thus observed an inflationary dynamic driven by excess demand initially in goods, and which has currently shifted to the services sector, and which therefore requires moderation of economic activity for monetary policy channels to act. Such a process demands serenity and patience in the conduct of monetary policy for the convergence of inflation to its targets. 16. The further deterioration of inflation expectations in the Focus survey, especially at longer maturities, was much debated. It has been pointed out that the behavior of expectations is a fundamental aspect of the inflationary process since it affects the setting of present and future prices and wages. As higher inflation is projected ahead, companies and workers start to incorporate such future inflation in the adjustments of prices and wages. Thus, there is a greater rise in prices in the current period, and the inflationary process is fed by these expectations. It was also highlighted that the anchoring of expectations is a key factor for price stability. Therefore, and following the best international practice, the Committee incorporates expectations in its decision-making process, analyzing and including them as one of the factors affecting its inflation projections. 17. Additional tightening of credit conditions was observed in some modalities. Some members believe that this movement is in line with what is expected, considering the interest rates rise undertaken until the middle of the second half of 2022. For these members, an increase in delinquency and a slowdown in credit granting should still be expected, but in line with what was observed in previous monetary policy tightening cycles. Other members, in contrast, assess that in the most recent period the tightening of credit granting was more intense than expected, but focused on some specific markets. The Committee believes that the BCB has the appropriate and necessary liquidity instruments linked to macroprudential policy to address localized relevant frictions in the system, should they occur. Furthermore, it reinforced that monetary policy is more appropriate to act in a counter-cyclical manner on the aggregate demand. 18. The Committee also discussed the impacts of the fiscal scenario on inflation. In this regard, the Copom emphasized again that the net effect of the fiscal policy conduct on inflation is highly dependent on the current macroeconomic and financial conditions. Copom evaluated that the Ministry of Finance's commitment to the implementation of the fiscal package, which is already identified in fiscal statistics and the reinstatement of fuel taxes, smooths the fiscal stimuli on demand, reducing the upside risk on inflation in the short-term. Furthermore, the Committee will continue monitoring the elaboration, discussion, and implementation of the fiscal framework that will be presented by the Government and voted by the National Congress. Copom emphasized that there is no mechanical relationship between the convergence of inflation and the presentation of the fiscal framework, since the former remains conditional on the reaction of inflation expectations, the public debt projections, and the asset prices. Nevertheless, the Committee stresses that the materialization of a scenario with a solid and credible fiscal framework might result in a more benign disinflationary process through its effect on the expectations channel, by reducing inflation expectations, the economic uncertainty, and the risk premium on domestic assets. 19. The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; (ii) the uncertainty about the fiscal framework and its impacts on the expected path of the public debt; and (iii) a larger or more persistent deanchoring of long-term inflation expectations. Among the downside risks, it should be noted (i) an additional reduction in the prices of international commodities measured in local currency; (ii) a greater than projected deceleration of global economic activity, particularly due to adverse conditions in the global financial system; and (iii) a slowdown in domestic credit granting larger than what would be compatible with the current stance of monetary policy. 20. On the one hand, the recent reinstatement of fuel taxes has reduced the uncertainty of the fiscal results in the short term. On the other hand, the current scenario, marked by high volatility in financial markets and deanchored long-term inflation expectations from the targets, requires further attention when conducting monetary policy. The Committee judges that the deanchoring of long-term inflation expectations raises the cost of the disinflation that is needed to reach the targets established by the National Monetary Council. In this scenario, Copom reaffirms its commitment to set monetary policy to meet the targets. 21. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 22. The Committee decided again to emphasize the six-quarter-ahead horizon in its projections but anticipates that for the next quarter the Committee will again use the usual calendar-year horizon, since the six-quarter horizon ahead will coincide with the 2024 calendar year, so there will be no more direct effect from the tax changes on the usual horizon. 23. Copom started the debate by evaluating whether the previously outlined strategy of stable interest rates would be enough to ensure the convergence of inflation towards to its targets. To this end, the Committee has continued its process of analyzing the main determinants of the inflation path and how they have behaved in the most recent period. No significant change occurred in the prospective scenario for the output gap, but a deeper debate took place about the effects of a possible greater-than-projected credit tightening on economic activity. As for services inflation and inflation cores, increased resilience and lower speed are observed in the recent releases, in line with the non-linear process already anticipated by Copom. In addition, inflation expectations followed a deanchoring process, partially related to the questioning about a likely change in future inflation targets. The Committee evaluates that the credibility of pursued targets is a fundamental component of the inflation targeting regime and contributes to the proper functioning of the expectations channel, making the disinflation quicker and less costly. In this regard, decisions that induce a reanchoring of expectations would reduce the disinflationary cost and uncertainties associated with this process. 24. The changes in the Copom’s inflation projections have been primarily affected by changes in expectations, as in its previous meeting. Finally, in the balance of risks, most of the debate was, on the one hand, between a greater deanchoring of inflation expectations in longer terms and, on the other hand, a more abrupt reduction in the domestic or global credit granting affecting the economic activity. Copom emphasized that the monetary policy conduct, at this moment, requires serenity and patience to incorporate the inherent delays in the inflation control through interest rates and, therefore, to reach the goals in the relevant monetary policy horizon. 25. Lastly, the Committee reinforced that the harmony between monetary and fiscal policies reduces distortions and uncertainty, facilitates the disinflationary process, and fosters full employment over time. In this regard, the Committee reinforces the importance that public and private credit granting remains at competitive interest rates sensitive to the Selic. 26. Considering the assessed scenarios, the balance of risks, and the broad array of available information, the Copom decided to maintain the Selic rate at 13.75% p.a. The Committee judges that this decision is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023 and, to a larger degree, 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and fostering full employment. 27. Taking into account the uncertainty of the scenarios, the Committee remains vigilant, assessing if the strategy of maintaining the Selic rate for a long period will be enough to ensure the convergence of inflation. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets, which have shown additional deterioration, especially at longer horizons. The Committee reinforces that future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 28. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza, and Renato Dias de Brito Gomes.
br	copom_minutes_20221207.txt	1. The global environment remains adverse and volatile, marked by prospects of below-potential 2023 global growth. The tightening of financial conditions in major economies, difficulties in energy supply to Europe, and a challenging scenario for growth in China, partly due to the Covid-19 policy in the country, reinforce a slowing global growth outlook in the coming quarters. 2. The inflationary environment remains challenging. There is a normalization in supply chains and an accommodation in the prices of major commodities in the recent period, which should lead to a moderation in global goods-related inflationary pressures. In turn, the low level of labor market slack in some economies, coupled with high current inflation and a high degree of diffusion, suggests that inflationary pressures on the services sector should last longer. 3. The process of normalization of monetary policy in advanced economies continues towards contractionary rates synchronized across countries, tightening financial conditions, impacting economic growth expectations, and raising the risk of abrupt repricing movements in the markets. The Committee noted a stronger market sensitivity of financial assets to fiscal fundamentals, including in advanced economies, and lower liquidity in several markets. This environment calls for greater caution in the conduct of economic policies also by emerging economies. 4. Turning to the Brazilian economy, the set of indicators released since the previous meeting corroborates the scenario of slowdown in the growth expected by the Committee. The release of the third quarter GDP figures suggested a more moderate growth rate than in previous quarters, despite expansion in all components of demand. Similarly, the labor market continues to recover, but at a slower pace than in previous months. 5. Despite the recent reduction, especially on items which are more volatile and affected by tax measures, consumer inflation remains high. Items related to industrial goods, reflecting the more intense decrease in producer prices and the reduction of pressures in global value chains, also showed deceleration, albeit still slow. The inflation of the components more sensitive to the economic cycle and the monetary policy, which present greater inflationary inertia, remain above the range compatible with meeting the inflation target, albeit showing some marginal moderation. Inflation expectations for 2022, 2023, and 2024 collected by the Focus survey are around 5.9%, 5.1%, and 3.5%, respectively. 6. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.252 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy flag is assumed to be “green” in December 2022 and “yellow” in December 2023 and 2024. In this scenario, Copom’s inflation projections stand at 6.0% for 2022, 5.0% for 2023, and 3.0% for 2024. Inflation projections for administered prices are -3.6% for 2022, 9.1% for 2023, and 4.2% for 2024. The Committee decided again to emphasize the six-quarter-ahead horizon, which reflects the relevant horizon, mitigates the primary effects from the tax changes but incorporates their second-round effects. On this horizon, which refers to the second quarter of 2024, the 12-month inflation projection stands at 3.3%. The Committee judges that the uncertainty in its assumptions and projections is higher than usual. 7. The Committee discussed the speed of the global disinflation process. On the one hand, the relaxation of pressures on global production chains, as well as the recent drop in commodity prices, indicate that the movement should continue in the short term, especially in the industrial goods, energy, and food segments. On the other hand, the Committee discussed that, given the spread of inflationary pressures to the services segment, which has a more inertial nature, in an environment of tight labor markets in several countries, the disinflation process should be non-linear and slower than that observed in recent episodes. 8. Thus, the Committee continues to assess that the commitment and determination of central banks to reduce inflationary pressures and anchor expectations consolidate a global scenario of longer tightening of financial conditions, with interest rates at the end of the tightening cycle maintained for a sufficiently long period at contractionary levels, raising the risk of a more pronounced global deceleration. 9. The Committee discussed two recent facts while analyzing the international markets. Firstly, it continues to assess that markets are more sensitive to developments that affect fiscal fundamentals, due to the combination of higher interest rates and sovereign debt at historically high levels. In addition, the Committee discussed the lower liquidity present in sovereign bond markets, possibly due to greater uncertainty in the interest rate dynamics, the reversal of long-term asset purchase policies and regulatory changes. These issues require monitoring and may also impact assets from emerging economies more strongly. 10. Data on economic activity in Brazil continues to indicate a more moderate pace of marginal growth. The release of the third quarter GDP figures indicates a reduction in the pace of growth, especially in some of the more cyclical components. Nevertheless, growth was observed in all demand components and, in the supply side, growth in industry and services. Moreover, labor market data also indicate a reduction in the pace of job openings, but still with positive marginal net hirings. The set of released data, including the drop in confidence indicators and the reduction in credit granting, together with the lagged effects of monetary policy, reinforce the Committee's expectation of a slowdown in the pace of economic activity, which should worsen over the coming quarters. 11. The inflationary outlook was then discussed, based on the more recent information. Some members noted the benign movement of commodities in BRL, highlighting additional downside risks ahead. Other members emphasized the volatile nature of these prices in an environment of pressured inventories. Finally, all members evaluated that current inflation did not surprise significantly in relation to expectations or substantially changed the understanding about future inflation dynamics. Moreover, they emphasized that disinflation in services and core inflation – components with greater inertia – will require increased attention and perseverance in the conduct of monetary policy. 12. The Committee discussed extensively the impacts of different fiscal scenarios on inflation. In its analysis, the Committee reiterated the different channels through which fiscal policy can affect inflation not only via the primary effects of aggregated demand but also via asset prices, the degree of economic uncertainty, inflation expectations, and neutral interest rate. The Committee evaluated that changes in parafiscal policies or the reversal of structural reforms that lead to a less efficient allocation of resources might reduce the power of monetary policy. In the different exercises analyzed, it was evaluated that the final effect, either on inflation or on activity, will depend on both the combination and the magnitude of the fiscal and parafiscal policies. Furthermore, it was highlighted that the existence of economic slack and the confidence in the debt sustainability are determining factors for an expansionary fiscal policy to achieve the aimed impacts on the economic activity. In an environment of a narrow output gap, the impact of significant fiscal stimulus on the path of inflation tends to outweigh the aimed impacts on economic activity. 13. The Committee believes that there is still a lot of uncertainty about the prospective fiscal scenario and that the moment requires caution in risk assessment. The Committee reiterates that it will continue to monitor future fiscal policy developments and their potential impacts on prospective inflation dynamics. 14. It emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; (ii) the heightened uncertainty about the country's future fiscal framework and additional fiscal stimuli that support aggregate demand, partially incorporated in inflation expectations and asset prices; and (iii) an output gap tighter than the one currently adopted by the Committee in its reference scenario, especially in the labor market. Among the downside risks, it should be noted (i) an additional reduction in the prices of international commodities measured in local currency; (ii) a greater-than-projected deceleration of global economic activity; and (iii) the continuity of tax cuts assumed to be reversed in 2023. The current scenario, particularly uncertain on the fiscal side, requires serenity when evaluating risks. The Committee will closely monitor future developments in fiscal policy and, in particular, its effects on asset prices and inflation expectations, with potential impacts on the dynamics of future inflation. 15. Copom discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for inflation. 16. The 12-month inflation projection for the second quarter of 2024, in the scenario using the interest rate trajectory extracted from the Focus Survey, remains consistent with the strategy of inflation convergence to around the target over the relevant horizon. The Committee decided again to emphasize the six-quarter-ahead horizon for its projections, and stresses that this decision is conditional on the temporary nature of the taxes. Moreover, the Committee continues to consider that inflation projection for 2024 is also around the target. This assessment reflects the lower-than-normal visibility of the forward-looking scenario, which increases the uncertainty of the point projections communicated by the Committee over longer horizons. 17. Copom anticipates that, if the alternative scenario of maintaining tax exemption on fuels in 2023 materializes, it will again emphasize usual horizons that include the first quarter of 2023. However, it assesses that there will be no relevant impacts on the conduct of monetary policy since the primary effects of such measures are already being disregarded. 18. Copom began by discussing the evolution of the broad array of data monitored, the projections, inflation expectations, output gap, and the balance of risks. Copom's inflation projections showed a slight increase over the relevant horizon due to both an increase in the projection for the inflation of market prices in shorter terms and a revision of the projection for the inflation of administered prices over longer terms. Compared to the previous meeting, the median inflation expectations from the Focus Survey rose slightly for 2023 and remained stable for 2024. However, regarding 2024, the Committee noted with concern a rise in the average expectations. The uncertainty about future fiscal dynamics, and its consequences on inflation dynamics, was discussed, and the uncertain environment was deemed to require serenity in assessing these risks. Services inflation showed some moderation but remains at high levels, and the Committee believes that the disinflation process of this component will become clearer over time. Finally, regarding the output gap, the Committee observed a reduction in the degree of economic slack in the third quarter, due to data revisions and the release of domestic variables, but believes that the gap should widen over the relevant horizon. 19. Copom chose to maintain the interest rate, reinforcing the need to evaluate, over time, the cumulative impacts to be observed of the intense and timely monetary policy cycle already undertaken. Therefore, the Committee members assessed that, given the data released, projections, inflation expectations, the balance of risks, and the lags of the effects of the monetary policy already in significantly contractionary territory, it was appropriate to maintain the interest rate at the level of 13.75% p.a. The Committee reinforced that it is necessary to remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation. 20. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee emphasizes that it will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 21. Considering the assessed scenarios, the balance of risks, and the broad array of available information, the Copom decided to maintain the Selic rate at 13.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks, and is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023 and 2024. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment. 22. The Committee will remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation. The Committee emphasizes that it will persist until the disinflationary process consolidates and inflation expectations anchor around its targets. The Committee reinforces that future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. 23. The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Paulo Sérgio Neves de Souza and Renato Dias de Brito Gomes.
br	copom_minutes_20191030.txt
br	copom_minutes_20190918.txt
br	copom_minutes_20180919.txt
br	copom_minutes_20181031.txt
br	copom_minutes_20200805.txt	1. Regarding the global outlook, the Covid-19 pandemic keeps causing the largest economic downturn since the Great Depression. Against this backdrop, despite some promising signs of recovery in major economies, and some moderation in financial assets volatility, the environment for emerging economies remains challenging. 2. Turning to the Brazilian economic activity, recent indicators suggest a partial recovery. Sectors more directly affected by social distancing measures remain depressed despite the offsetting effects of the government transfer programs. Prospectively, uncertainty about economic growth remains larger than usual, especially for the period starting at the end of this year, concurrently with the expected winding up of the emergency transfer programs. 3. Various measures of underlying inflation remain below the level compatible with meeting the inflation target at the relevant horizon for monetary policy. 4. Inflation expectations for 2020, 2021, and 2022 collected by the Focus survey are around 1.6%, 3.0%, and 3.5%, respectively. 5. Short-term inflation seems to be cooling after July’s sharp increase. Relative to the previous Copom Meeting, short-term projections remain relatively stable. Revisions to some components of service price inflation have offset the impact of the depreciation of the Brazilian real and the rise in commodity prices. 6. The Copom's inflation projections in the hybrid scenario with interest rate path extracted from the Focus survey and constant exchange rate at R$5.20/US$2 stand around 1.9% for 2020, 3.0% for 2021 and 3.4% for 2022. This scenario assumes a path for the Selic rate that ends 2020 at 2.0% p.a., rises to 3.0% p.a. in 2021 and 5.0% p.a. in 2022. In this scenario, inflation projections for administered prices are 1.6% for 2020, 3.4% for 2021, and 3.9% for 2022. 7. The scenario with constant interest rate at 2.25% p.a. and constant exchange rate at R$5.20/US$ yields inflation projections around 1.9% for 2020, 3.0% for 2021 and 3.7% for 2022. In this scenario, inflation projections for administered prices are 1.6% for 2020, 3.4% for 2021, and 3.9% for 2022. 8. The Committee emphasizes that risks to its baseline scenario remain in both directions. 9. On the one hand, economic slack may continue to produce a lower-than-expected prospective inflation trajectory. This risk increases if a slower reversion of the pandemic effects lengthens the environment of high uncertainty and precautionary savings. 10. On the other hand, fiscal policy responses to the pandemic that permanently aggravate the fiscal path or frustrations regarding the continuation of the reform agenda may increase the risk premium. Additionally, the credit and transfer programs implemented in response to the pandemic may cause a smaller-than-estimated decline in aggregate demand, introducing an asymmetry to the balance of risks. This set of factors could potentially result in a higher-than-expected path for inflation over the relevant horizon for monetary policy. 11. Regarding the global economy, the data already available for the 2020Q2 GDP did not surprise, but it showed that the depth of the current economic downturn is only comparable to that of the Great Depression. There are some promising signs of recovery which, however, has shown to be incomplete. The strong recovery in consumption was not followed by the services sector. The Committee pondered that the main restriction to a full recovery in the major economies is the evolution of the pandemic itself, and the possibility of a second wave of the virus is a major risk. 12. The Copom members discussed the evolution of domestic economic activity in light of the available information and indicators. They evaluated that recent data suggest a partial recovery of the economic activity. Government transfer programs have allowed for a relatively strong resumption of durable goods consumption and even of investment. However, several service sector activities, especially those most directly affected by social distancing measures, remain quite depressed. Looking forward, the poor predictability associated with the evolution of the pandemic and the necessary decline in emergency aid by the end of 2020 increase uncertainty about the speed of the economic recovery. The Committee considered that this unpredictability and the risks associated with the evolution of the pandemic may imply a domestic scenario characterized by an even more gradual recovery of the economy. 13. The Copom members debated on the level of economic slack. As with the activity, the Committee believes that the pandemic should continue to have heterogeneous effects on the economic sectors. Given the nature of the shock, the service sector should continue to have a larger economic slack than other sectors. The Committee concluded that the nature of the crisis probably implies that the disinflationary pressures from reduced demand may last longer than in previous recessions. 14. The Committee then assessed the appropriate degree of stimulus for the current environment. First, it analyzed whether the existence of an asymmetry in its balance of risks, mainly related to fiscal issues and the continuation of reforms in the Brazilian economy, would be a sufficient reason to maintain the stimulus at its current level. Given its perception of economic slack and prospective inflation, the Committee considered that, although asymmetric, its projections for inflation are below the target for the relevant horizon for monetary policy. Therefore, in line with its inflation targeting mandate, the Committee concluded that it would be appropriate to increase residually the degree of monetary stimulus. 15. The Committee then resumed discussion of a potential effective lower limit for the Brazilian policy interest rate and its connection with prudential and financial stability issues. For the majority of the members of the Copom, this limit would be significantly higher among emerging economies than among developed countries due to the existence of a risk premium. This premium is dynamic and tends to be larger in Brazil, given the country's relative fiscal fragility and the uncertainties regarding its prospective fiscal path. In this context, we would already be close to the level from which further interest rate reductions could be accompanied by asset price instability. 16. The Copom also discussed the relative importance of the main components of credit and operating costs of the financial system. Considering the long history of the Brazilian economy operating with the basic interest rate at a very high level, the unprecedented low interest rates may compromise the performance of some markets and economic sectors, with potential impact on financial intermediation. Based on results from stress test scenarios, the Committee considers that the financial system is resilient to the credit risk arising from the current pandemic. However, when analyzing the financial system in a broad way – considering its various industries, markets, products and financial services – the Committee reflected that an unprecedentedly low interest rate environment may generate increased asset price volatility. Moreover, without the necessary time to transition to a new environment, it may affect the proper functioning and dynamics of the financial system and the capital markets. Hence, the Committee concluded that possible new interest rates reductions would demand caution and additional gradualism. To this end, if necessary, further interest rate cuts would require greater clarity about prospective inflation and activity and could be spaced over time. 17. In order to provide the monetary stimulus deemed adequate to meet the inflation target, but maintaining the necessary caution for prudential reasons, the Copom considered the use of a forward guidance as an additional monetary policy tool. The Copom discussed the limitations on the use of this instrument in emerging countries. Relative to developed countries, emerging countries are more susceptible to contagion from external crises and have greater vulnerabilities in their economic fundamentals. Therefore, due this greater unpredictability and volatility, the use of such an instrument becomes more challenging. The Committee concluded that despite those limitations, the forward guidance would be the policy strategy with the best cost-benefit ratio. The forward guidance transmits the Committee's vision on its future actions and tends to adjust the expectations reflected on the intermediary part of the yield curve. 18. To adapt the forward guidance to the dynamic limits imposed by prudential issues, the Committee considered that it should have an asymmetric policy intention, in which, if the necessary conditions were met, the Copom would not raise the interest rate but could reduce it. To maximize its effectiveness, the Committee decided that this forward guidance should be conditional on inflation expectations, as well as on the inflation projections of its baseline scenario, for the relevant monetary policy horizon, which currently includes 2021 and, to a lesser extent, 2022. This information on inflation would be considered altogether and, when they were sufficiently close to the inflation target for the corresponding horizon, they would indicate the end of the intention. 19. Given the difficulties inherent in using forward guidance in emerging economies, in addition to expectations and projections of inflation in the relevant horizon, the Committee also deemed necessary to condition its interest rate policy intention on two other factors. First, it is conditional on the maintenance of the fiscal regime, since its rupture would imply significant changes to the structural interest rate of the economy. Second, it is conditional on the anchoring of long-term inflation expectations, given that an unanchoring would indicate that the costs derived from the monetary stimulus would be outweighing its benefits. 20. Taking into account the baseline scenario, the balance of risks, and the broad array of available information, the Copom unanimously decided to lower the Selic rate by 0.25 percentage point to 2.00% p.a. The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with the convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2021 and, to a lesser extent, 2022. 21. The Committee believes that persevering in the process of reforms and necessary adjustments in the Brazilian economy is essential for a sustainable economic recovery. The Copom also stresses that doubts regarding the continuation of the reform agenda and permanent changes to the fiscal consolidation process could result in an increase in the structural interest rate. 22. The Copom believes that the current economic conditions continue to recommend an unusually strong monetary stimulus but it recognizes that, due to prudential and financial stability reasons, the remaining space for monetary policy stimulus, if it exists, should be small. Consequently, possible future adjustments to the current degree of monetary stimulus would occur with additional gradualism and would depend on the perception of the fiscal trajectory, as well as on new information that changes the Committee's current assessment about prospective inflation. 23. Despite the asymmetry on its balance of risks, the Copom does not foresee reductions in the monetary stimulus unless inflation expectations, as well as its baseline scenario inflation projections, are sufficiently close to the inflation target at the relevant horizon for monetary policy, which currently includes 2021 and, to a lesser extent, 2022. This intention is conditional on the maintenance of the current fiscal regime and on the anchoring of long-term inflation expectations. 24.The following members of the Committee voted for this decision: Roberto Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Fabio Kanczuk, Fernanda Feitosa Nechio, João Manoel Pinho de Mello, Maurício Costa de Moura, Otávio Ribeiro Damaso, and Paulo Sérgio Neves de Souza.

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