MNI BRIEF: BCB Skips Next Hike Magnitude Due To Uncertainty

The Central Bank of Brazil deemed it appropriate to communicate that its next move would be of a smaller magnitude than its recent interest rate adjustments, but given heightened uncertainty, decided to indicate only the "direction" of the next hike, minutes from its meeting showed Tuesday.

"In its communication, the Committee chose to combine three indications regarding the conduct of monetary policy, should the expected scenario be confirmed. Firstly, it assessed that, given the adverse scenario for inflation dynamics, it was appropriate to indicate that the cycle has not come to an end," the minutes stated.

"Secondly, due to the lags inherent in the ongoing monetary cycle, the Committee also deemed it appropriate to communicate that the next move would be of a smaller magnitude. Furthermore, given the heightened uncertainty, it decided to indicate only the direction of the next move," the document added.

The BCB hiked its Selic rate by 100 basis points again to 14.25% last week, while signaling a smaller increase at its next meeting in May. (See MNI: Independent CenBanks Reduce Inequality - BCB Advisor)