Minutes released following the central bank's January 28 meeting indicate the institution will let incoming data guide how large and how long its forthcoming monetary easing cycle will be. The board, chaired by Gabriel Galipolo, held the benchmark Selic rate at 15% - its highest level in nearly two decades - and described recent economic signals as mixed, complicating efforts to identify a clear trend in the slowdown of activity and its impact on price dynamics.
According to the published minutes on Tuesday, members of the committee spoke unanimously in favor of sustaining a restrictive stance on interest rates until the disinflation process is firmly established and market expectations converge with the central bank's targets. The text highlights ongoing pressure on prices and notes the labor market continues to display notable dynamism, supporting persistent cost-side resilience.
The minutes credit the bank's cautious monetary policy for contributing to progress on disinflation. They also cite a more appreciated exchange rate and more favorable commodity prices as factors that have helped reduce inflationary pressures in industrial goods and food categories. The document records some easing in services inflation, while underscoring that a strong labor market remains an offsetting force for price pressures in that sector.
Official statistics referenced in the minutes show annual inflation reached 4.5% in the first half of January. Central bank projections included in the record expect inflation to decline to 3.2% by the third quarter of 2027, the horizon the committee regards as relevant for its monetary policy deliberations.
Minutes also warned of a possible headwind coming from fiscal dynamics. Policymakers noted that uncertainties surrounding public debt stabilization could push up the economy's neutral interest rate, a development that would reduce the potency of monetary policy and raise the economic cost associated with lowering inflation.
Taken together, the minutes present a picture of a central bank prepared to be patient and data-dependent: keeping policy tight until clear and sustained evidence of disinflation and anchored expectations emerges, while remaining attentive to exchange rate, commodity price, and fiscal-stability developments that could alter the policy outlook.