The bank took into account the "adverse" external scenario - with uncertainty about the flexibility of monetary policy in the United States as the main factor to take into account - and the slowdown of the disinflationary process in Brazil.

The Central Bank of Brazil has been in favor of applying "even greater" caution when making monetary policy decisions, with the possibility on the table of raising interest rates to ensure the convergence of inflation to the objective "if considers it appropriate", although for the moment he has ruled out advancing any future strategy.

This is clear from the minutes of the last meeting of the central bank's monetary policy committee, held last week, and in which it was again unanimously chosen to maintain interest rates at 10.5%.

The reasons why this decision has been made are domestic and international. The bank took into account the "adverse" external scenario - with uncertainty about the flexibility of monetary policy in the United States as the main factor to take into account - and the slowdown of the disinflationary process in Brazil.

Given this situation, the bank has pointed out that it has become more challenging to achieve convergence of inflation to the target, which is why it has concluded that an "even more cautious" monetary policy and "diligent" monitoring of the evolution of inflation is necessary. the situation.

"The committee assessed that the time has come to diligently monitor inflation conditions and greater vigilance in the face of a more challenging scenario," states the minutes released this Tuesday.

In light of this monitoring, the committee will evaluate what is the best strategy. On the one hand, it assesses whether the strategy of maintaining interest rates for a sufficiently long time will bring inflation to the target over the relevant horizon. On the other hand, it has returned to the idea that it will not hesitate to raise the interest rate to ensure the convergence of inflation to the target if it considers it appropriate.

"The strategies adopted by the committee will reflect the commitment to meet the inflation target, while also seeking to re-anchor inflation expectations to minimize the cost of disinflation. The committee will remain alert and remember that any future interest rate adjustment will be dictated by the firm commitment to bring inflation closer to the target," he explained.

RE-ANCHORING EXPECTATIONS

One of the central bank's closest objectives is the re-anchoring of inflation expectations, considered an essential element to guarantee the convergence of inflation towards the objective.

The committee assesses that the conduct of monetary policy is a fundamental factor in re-anchoring expectations and will continue to make decisions that safeguard credibility and, consequently, reduce the cost of disinflation.

Thus, he has assured that he will not shy away from his commitment to achieving the inflation goal and understands the fundamental role of expectations in the dynamics of inflation.

"The inflationary impacts resulting from the movements of market variables and inflation expectations, if persistent, corroborate the need for greater vigilance," the entity stated.