BCB COPOM Minutes - Meeting 269
Central bank: bcb | Type: minutes | Date: 2025-03-18

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Minutes of the Meeting of the
Monetary Policy Committee — Copom
March 18-19, 1025
269th
269th Meeting
COPOM
March 18-19
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Copom members analyzed the recent performance and prospects for the Brazilian and
international economies, under the monetary policy framework, whose objective is to achieve the
inflation target set by the National Monetary Council.
Date: March 18-19, 1025
Place: BCB Headquarters’ meeting rooms on the 8th floor (3/18 and 3/19 on the morning)
and 20th floor (3/19 on the afternoon) – Brasilia – DF – Brazil
Starting and ending
times:
March 18: 10:10 AM – 12:08 PM; 2:11 PM – 6:09 PM
March 19: 10:10 AM – 11:29 AM; 2:36 PM – 6:38 PM
In attendance:
Copom Members Gabriel Muricca Galípolo – Governor
Ailton de Aquino Santos
Diogo Abry Guillen
Gilneu Francisco Astolfi Vivan
Izabela Moreira Correa
Nilton José Schneider David
Paulo Picchetti
Renato Dias de Brito Gomes
Rodrigo Alves Teixeira
Department Heads in
charge of technical
presentations (attending
on 3/18 and on the
morning of 3/19):
Alan da Silva Andrade Mendes – Department of Foreign Reserves
André Minella – Research Department (also attending on the afternoon of 3/19)
André de Oliveira Amante – Open Market Operations Department
Fábio Martins Trajano de Arruda – Department of Banking Operations and Payments System
Marcelo Antonio Thomaz de Aragão – Dept of International Affairs (attending on 3/18)
Ricardo Sabbadini – Department of Economics
Other participants Alexandre de Carvalho – Office of Economic Advisor
(attending on 3/18 and André Maurício Trindade da Rocha – Head of the Financial System Monitoring Department
on the morning of 3/19): Arnaldo José Giongo Galvão – Press Office Advisor
Cristiano de Oliveira Lopes Cozer – General Counsel
Edson Broxado de França Teixeira – Head of Office of the Deputy Governor for Supervision
Eduardo José Araújo Lima – Head of Office of the Deputy Governor for Economic Policy
Euler Pereira Gonçalves de Mello – Deputy Head of the Research Department
Fernando Alberto G. Sampaio C. Rocha – Head of the Department of Statistics
Isabela Ribeiro Damaso Maia – Head of the Sustainability and International Portfolio Investors
Julio Cesar Costa Pinto – Head of Office of the Governor
Kathleen Krause – Deputy Head of the Prudential and Foreign Exchange Regulation Department
(attending on the afternoon of 3/18 and on the morning of 3/19)
Laura Soledad Cutruffo Comparini – Deputy Head of the Department of Economics
Leonardo Martins Nogueira – Head of Office of the Deputy Governor for Monetary Policy
Luís Guilherme Siciliano Pontes – Deputy Head of the International Reserves Department
Mardilson Fernandes Queiroz – Head of the Financial System Regulation Department
(attending on 3/18)
Mario Rubem do Coutto Bastos – Deputy Head of the Department of Banking Operations and
Payments System
Olavo Lins Romano Pereira – Deputy Head of the Department of International Affairs
Ricardo Eyer Harris – Head of Office of the Deputy Governor for Regulation
Rogerio Antonio Lucca – Executive Secretary
Simone Miranda Burello – Advisor in the Office of the Deputy Governor for Monetary Policy
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A) Update of the economic outlook and the Copom’s scenario 1
1. The global environment remains challenging due to the economic policy and outlook
in the United States, mainly due to the uncertainty about trade policy and its effects.
This scenario poses even more questions about the pace of economic deceleration,
disinflation and, consequently, about the Fed’s monetary policy stance and the pace of
growth in other countries.
2. The central banks of major economies remain committed to bringing inflation back
to its targets in a context characterized by labor market pressures. The Committee
judges that the external environment continues to require caution from emerging
market economies.
3. Regarding the domestic scenario, the set of indicators on economic activity and labor
market has been exhibiting strength, even though we observe signals that suggest an
incipient moderation in growth.
4. Headline inflation and measures of underlying inflation remain above the inflation
target and have again increased in recent releases. Inflation expectations for 2025 and
2026 collected by the Focus survey increased significantly and stand at 5.7% and 4.5% ,
respectively.
B) Scenarios and risk analysis
5. The inflation outlook remains challenging in several dimensions. The Committee
analyzed economic activity, aggregate demand, inflation expectations, current
inflation, and the international scenario. Copom then discussed inflation projections
and expectations before deliberating on the current decision and future
communication.
6. The Committee continues to evaluate that the prospective baseline scenario involves
a slowdown in economic activity, which is part of the monetary policy transmission
process and an element necessary for the convergence of inflation to the target. Data
for the last few months continue to sign an incipient moderation in growth, in line with
the Copom's baseline scenario. The Committee reinforced that some more recent
indicators, such as those for services, industry, or the employed population, have
pointed to a moderation in growth after extraordinary resilience in the labor market
and economic activity. The seasonally adjusted Gross Domestic Product (GDP) grew by
0.2% in 2024Q4 over 2024Q3, following expansions of 1.3% and 0.7% in the second and
third quarters of the year , respectively . On the same comparison basis, on the
aggregate demand side, household consumption declined, after a sequence of thirteen
consecutive increases. That said, there are still few conclusions in the understanding of
(i) the past, which is subject to revisions and seasonality; (ii) the present, with mixed
contemporaneous data that are not unequivocal in one direction and; (iii) the future, in
light, for example, of anticipated strong agricultural growth in the first quarter with
possible consequences for other sectors. The Committee also emphasized that soft
data, such as those from confidence indicators and credit sentiment surveys, have
suggested a greater slowdown than that observed in the hard data. Moreover,
coincident hard data have shown mixed results depending on the sector or the
indicator. Lastly, in the labor market, in addition to inherent data volatility, employed
population has declined at the margin, but in an environment of low unemployment
and high income. Although recent data suggests some moderation, the labor market
remains heate d. The Committee will continue to monitor economic activity and
reiterates that the aggregate demand slowdown is an essential element of supply -
demand rebalancing in the economy and inflation convergence to the target.
1 Unless explicitly stated otherwise, this update considers changes since the January Copom meeting (268 th
meeting).
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7. The credit market has also remained strong in recent quarters due to the dynamism
of the labor market and economic activity. However, in line with the current scenario of
tighter financial conditions and higher risk premiums, bank credit has shown some
inflection more recently, with an increase in interest rates, lower risk appetite in the
credit supply, and a slower pace of credit granting. Therefore, one expects a scenario
marked, on the one hand, by a high household service-to-income ratio, but, on the other
hand, the continuity of the dynamism in the private securities market.
8. Regarding economic policy more broadly, the most emphasized issue was the
relevance of maintaining unobstructed monetary policy channels, with no elements
mitigating its action. Monetary policy acts through different channels, including credit,
leading the volume of loans to react to financial conditions and to expectations, as
prospective assessments impact current consumption and investment. In order to fulfill
its mandate and the convergence of inflation to the target at the lowest cost, monetary
policy must be able to act with all channels unobstructed.
9. The Committee remained firmly convinced that policies must be predictable,
credible, and countercyclical. In particular, the Committee's debate once again
highlighted the need for harmonious fiscal and monetary policies. More recently,
agents' perception about the fiscal regime and debt sustainability continued to impact
asset prices and expectations significantly. Copom reinforced its view that the
slowdown in structural reform efforts and fiscal discipline, the increase in earmarked
credit, and uncertaint ies over the public debt stabilization have the potential to raise
the economy's neutral interest rate, with deleterious impacts on the power of monetary
policy and, consequently, on the cost of disinflation in terms of activity.
10. Inflation expectations, measured by different instruments and obtained from
different groups of agents, have risen again in all terms, indicating further deanchoring
and thus making the inflation scenario more adverse. Deanchored inflation
expectations is a factor of discomfort shared by all Committee members and must be
tamed. Copom highlighted that environments with deanchored expectations increase
the disinflation cost in terms of activity. The scenario of inflation convergence to the
target becomes more challenging with deanchored expectations for longer horizons
and requires higher rates and for a longer period than would be otherwise appropriate.
11. Short-term inflation scenario remains adverse. Services inflation, which has greater
inertia, remains above the level required to meet the inflation target and has
accelerated in the most recent readings, in a context of a positive output gap. As for
industrialized goods, the recent movement of the exchange rate has pressured prices
and margins, already materialized in a rise in wholesale prices, suggesting that it will
pass through to retail prices in the coming months. Food prices remain high and tend
to spread over other prices on the medium term given the presence of important
inertial mechanisms in the Brazilian economy. Lastly, in the short -term analysis it was
highlighted that, if confirmed the reference scenario projections, the 12 -month
inflation will remain above the upper li mit of the inflation target tolerance interval for
six consecutive months as of January 2025. Therefore, there would be a target breach
with the June 2025 inflation under the new inflation-targeting framework.
12. Prospectively, the Committee will monitor the pace of economic activity, which is
fundamental in determining inflation, particularly services inflation; the exchange rate
pass-through to inflation, after a process of increased exchange rate volatility; and
inflation expectations, which have shown further deanchoring and are drivers of the
future inflation behavior. It was emphasized that inflationary vectors remain adverse,
such as a positive output gap, higher current inflation, and more deanchored inflati on
expectations.
13. The external environment remains challenging, with significant economic and
geopolitical uncertainties. It is assessed that there is a concomitant increase in
uncertainty and a deterioration of the global growth scenario compared with the
previous Copom meeting. Copom's baseline scenario continues to predict a gradual and
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orderly slowdown of the U.S. economy, but, in addition to the inherent uncertainties of
the economic outlook, there are doubts about the conduct of economic policy in various
dimensions, such as possible fiscal stimuli; labor supply restrictions; scope and intensity
of the import tariffs rising; and significant changes in relative prices resulting from shifts
in the energy matrix, which could negatively impact financial conditions and capital
flows to emerging market economies. The uncertainty surrounding t hese policies is
already restricting new investments and affects activity. Similarly, uncertainty about the
implementation of tariffs also affects expectations, price determination, and inflation.
Therefore, part of this scenario deterioration, also discussed in recent meetings, is
already starting to materialize. Moreover, there is renewed pressure in Europe to
expand public spending, financed by debt issuance. Such movements tend to tighten
global financial conditions, raising rates and potentially pressuring the exchange rate in
emerging market economies. The Committee reinforced that the central banks'
commitment to achieving their targets is a fundamental ingredient in the disinflationary
process, corroborated by recent indications of cautious monetary easing cycles in
several countries. As usual, the Committee will focus on the transmission mechanisms
from the external environment to the domestic inflation dynamics and their impact on
the outlook. It was also emphasized that a context of greater global uncertainty and
more abrupt exchange rate movements requires greater caution in the conduct of
domestic monetary policy.
14. Copom then addressed the projections. In the reference scenario, the interest rate
path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.802
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. Moreover, the energy tariff flag is
assumed to be “green” in December 2025.
15. In the reference scenario, four -quarter inflation projections for 2025 and for the
third quarter of 2026 – the current relevant monetary policy horizon – are 5.1% and
3.9%, respectively (Table 1).
16. The balance of risks remains asymmetrical, indicating a greater probability of higher
inflation than that in the baseline scenario. Among the upside risks for the inflation
outlook and inflation expectations, it should be emphasized (i) a more prolonged period
of deanchoring of inflation expectations; (ii) a stronger -than-expected resilience of
services inflation due to a more positive output gap; and (iii) a conjunction of internal
and external economic policies with a stronger -than-expected inflationary impact, for
example, through a persistently more depreciated currency. Among the downside risks,
it should be noted (i) impacts on the inflation scenario in the case of a greater -than-
projected deceleration of domestic economic activity; and (ii) a less inflationary scenario
for emerging market economies arising from shocks on international trade or global
financial conditions.
C) Discussion of the conduct of monetary policy
17. Copom then discussed the conduct of monetary policy, considering the set of
projections evaluated, as well as the balance of risks for prospective inflation.
18. In the Committee's analysis, the scenario unfolded in such a way that the previous
indication of a 1.00 p.p. increase in the Selic rate deemed to be the right decision. It was
assessed that monetary tightening was required for the convergence of inflation to the
target in a scenario marked by deanchored expectations, high inflation projections, and
resilient activity.
2 It corresponds to the rounded value of the average exchange rate observed over the ten working days
ending on the last day of the week prior to the Copom meeting, according to the procedure adopted since
the 258th meeting.
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19. 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. Secondly, due to the lags inherent to the
ongoing monetary cycle, the Committee also deemed 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.
20. Beyond the next meeting, the total magnitude of the tightening cycle will be
determined by the firm commitment of reaching the inflation target and will depend
on the inflation dynamics, especially the components that are more sensitive to
monetary policy and economic activity, on the inflation projections, on the inflation
expectations, on the output gap, and on the balance of risks.
D) Monetary policy decision
21. The current scenario is marked by additional deanchoring of inflation expectations,
high inflation projections, resilience on economic activity, and labor market pressures,
which requires a more contractionary monetary policy.
22. Copom therefore decided to increase the Selic rate by 1.00 p.p. to 14.25% p.a., and
judges that this decision is consistent with the strategy for inflation convergence to a
level around its target throughout the relevant monetary policy horizon. Without
compromising its fundamental objective of ensuring price stability, this decision also
implies smoothing economic fluctuations and fostering full employment.
23. In light of the continuation of the adverse scenario for inflation convergence, the
heightened uncertainty and the lags inherent to the ongoing monetary tightening
cycle, the Committee anticipates an adjustment of lower magnitude in the next
meeting, if the scenario evolves as expected. Beyond the next meeting, the Committee
reinforces that the total magnitude of the tightening cycle will be determined by the
firm commitment of reaching the inflation target and will depend on the inflation
dynamics, especially the components that are more sensitive to monetary policy and
economic activity, on the inflation projections, on the inflation expectations, on the
output gap, and on the balance of risks.
24. The following members of the Committee voted for this decision: Gabriel Muricca
Galípolo (Governor), Ailton de Aquino Santos, Diogo Abry Guillen, Gilneu Francisco
Astolfi Vivan, Izabela Moreira Correa, Nilton José Schneider David, Paulo Picchetti,
Renato Dias de Brito Gomes, and Rodrigo Alves Teixeira.
Table 1
Inflation projections in the reference scenario
Year-over-year IPCA change (%)
Price Index 2025 2026Q3
IPCA 5.1 3.9
IPCA market prices 5.4 3.8
IPCA administered prices 4.3 4.2