BCB COPOM Minutes - Meeting 268
Central bank: bcb | Type: minutes | Date: 2025-01-28

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Minutes of the Meeting of the
Monetary Policy Committee — Copom
January 28-29, 2025
268th
268th Meeting
COPOM
January 28-29
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Date:
January 28-29, 2025
Place: BCB Headquarters’ meeting rooms on the 8th floor (1/28 and 1/29 on the morning)
and 20th floor (1/29 on the afternoon) – Brasilia – DF – Brazil
Starting and ending
times:
January 28: 10:04 AM – 12:12 PM; 2:15 PM – 6:17 PM
January 29: 10:07 AM – 11:22 AM; 2:30 PM – 6:42 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 1/28 and on the
morning of 1/29):
Alan da Silva Andrade Mendes – Department of Foreign Reserves
André Minella – Research Department (also attending on the afternoon of 1/29)
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 – Department of International Affairs
Ricardo Sabbadini – Department of Economics
Other participants Alexandre de Carvalho – Office of Economic Advisor
(attending on 1/28 and André Maurício Trindade da Rocha – Head of the Financial System Monitoring Department
on the morning of 1/29): 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
Enrico Bezerra Ximenes de Vasconcelos – Head of the Secretariat of Governance,
Coordination, and Strategic Monitoring
Julio Cesar Costa Pinto – Head of Office of the Governor
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
Marcos Ribeiro de Castro – Deputy Head of the Research Department
Olavo Lins Romano Pereira – Deputy Head of the Department of International Affairs
Renata Modesto Barreto – Deputy Head of the Department of Banking Operations and
Payments System (attending on 1/28)
Renato Baldini Junior – Head of the Department of Statistics
Renato Kiyotaka Uema – Head of the Financial System Regulation Department
Ricardo Eyer Harris – Head of Office of the Deputy Governor for Regulation
Ricardo Franco Moura – Head of the Prudential and Foreign Exchange Regulation Department
Simone Miranda Burello – Advisor in the Office of the Deputy Governor for Monetary Policy
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.
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A) Update of the economic outlook and the Copom’s scenario 1
1. The global environment remains challenging due mainly to the economic policy and
outlook in the United States, which poses questions about the pace of economic
deceleration, disinflation and, consequently, about the Fed’s monetary policy stance.
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.
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 5.5% and 4.2% ,
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 expectati ons before deliberating on the current decision and future
communication.
6. Over the past quarters, economic activity, despite the contractionary monetary
policy, has surprised positively and remained strong . In particular, the pace of growth
of household consumption and gross fixed capital formation highlights that domestic
demand has been growing at a fairly strong pace. As in previous analyses, the
Committee assesses that the combination of a robust labor market, expansionary fiscal
policy, and vigorous broad credit granting have supported consumption and aggregate
demand. Simil arly, over the past quarters, the labor market has been tight, as
demonstrated by measures of unemployment rate, employment level, and number of
voluntary layoffs. Nominal wages increase at a high rate, although there is some
moderation in the pace of real wage growth.
7. The Committee continues to evaluate that the prospective baseline scenario involves
a slowdown in activity, which is part of the monetary policy transmission process and an
element necessary for the convergence of inflation to the target. More recent data
provide early signs that some growth moderation, in line with the baseline scenario,
may be starting, particularly in the goods sector and in the more credit-sensitive sectors.
However, some mitigating factors suggest caution in the conclusions. Data are s till of
high frequency, and the difficulties involving seasonality and frequent revisions in those
series demand greater caution in the analysis. Moreover, it was recalled that, in the past,
data also suggested a n economic slowdown, but this perception was reverted in
subsequent months, reflecting only volatility in the series, with no change in the growth
trend, which showed remarkable resilience. Finally, as the labor market remains heated,
it is difficult to assess to what extent a possibl e slowdown woul d reflect weakening
demand or supply pressures, with different impacts on inflation. The Committee will
continue to monitor economic activity and reiterates that the aggregate demand
slowdown is an essential element of the supply-demand rebalancing process in the
economy and inflation convergence to the target.
8. 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
1 Unless explicitly stated otherwise, this update considers changes since the December Copom meeting (267th
meeting).
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tightening financial conditions and rising risk premium, bank credit has shown some
inflection more recently, especially in low -risk household lines. Conversely, the private
securities market continues to show a higher-than-expected volume growth and spread
reduction. Then, a multifaceted scenario is anticipated, marked by high household debt
service-to-income ratio, along with a dynamic private securities market.
9. Regarding the economic policy more broadly, 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 expec tations significantly. Copom
reinforced its view that the slowdown in structural reform efforts and fiscal discipline,
the increase in earmarked credit, and uncertainties 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. It was emphasized again that maintaining unobstructed the monetary policy
channels, with no elements mitigating their action, contributes to a more effective and
efficient conduct.
10. Inflation expectations, measured by different instruments and obtained from
different groups of agents, have risen significantly 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.
11. Short-term inflation scenario remains adverse. Food prices have risen significantly,
due to, among other factors, the drought observed throughout the year and the rise in
beef prices, also affected by the cattle cycle. This increase tends to spread over th e
medium term given the presence of important inertial mechanisms in the Brazilian
economy. Regarding industrialized goods, the recent exchange rate movement has
pressured prices and margins, suggesting a greater increase in these components in the
coming months. Finally, services inflation, which has greater inertia, remains above the
level required to meet the inflation target in a context of dynamic activity and has
accelerated in the most recent readings. In the short -term analysis it was highlighted
that, if confirmed the reference scenario projections, the 12-month inflation will remain
above the upper limit of the inflation target tolerance interval for the next six
consecutive months. 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 depreciation and increased exchange rat e
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, exchange rate depreciation, higher
current inflation, and more deanchored inflation expectations.
13. The external environment remains challenging, with significant economic and
geopolitical uncertainties. Although the baseline scenario used by the Committee has
not significantly changed, it was assessed that more extreme scenarios, with different
impacts on the inflation in emerging market economies, are more likely to materialize
than in the previous meeting. Copom's baseline scenario continues to predict a gradual
and orderly slowdown of the U.S. economy, but, in addition to the inherent
uncertainties of the economic environment, there are doubts about the conduct of
economic policy in various dimensions, such as possible fiscal stimuli, labor supply
restrictions, introduction of import tariffs, and significant changes in relative prices
resulting from sh ifts in the energy matrix, which could negatively impact financial
conditions and capital flows to emerging market economies. The Committee reinforced
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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 6.002
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 5.2% and
4.0%, respectively (Table 1).
16. The balance of risks remains asymmetrical, indicating a greater probability of higher
inflation than that in the baseline scenario. However, in its analysis of the balance of
risks, the Committee updated and changed some of the risks.
17. A recurring risk theme in the Committee's debate has been the deanchoring of
inflation expectations, including for long terms. This deanchoring process leads to price
and wage adjustments above the inflation target, requiring a more contractionary
policy t han would alternatively be necessary if no such deanchoring existed. The
Committee believes that this risk remains as the deanchoring becomes persistent and
changes the magnitude and frequency of adjustments in prices and wages. Another
highly relevant risk concerns the degree of overheating in the economy, particularly, its
effects on services inflation . Over the last quarters, as a result of activity data and
scenario updating, the Committee has changed its assessment of the degree of
economic slack , considering the output gap as positive. There is also a risk of higher
inflation related to the conduct of domestic and foreign economic policies, with a
primary impact through the exchange rate. The Committee closely followed the
movements of the exchange rat e, which has reacted notably to domestic fiscal news,
U.S. economic policy news, and the interest rate differential. The implementation of
certain policies in the U.S. may pressure domestic asset prices. It was then assessed that
the previous view of the p ossibility of a rise in inflation resulting from a more
depreciated exchange rate remained valid. Thus, although some of the risks have
materialized, the Committee considered that they are still present prospectively.
18. Conversely, the Committee considered that some of the downside risks to inflation
were no longer present, while others appeared more strongly in the debate. The
possibility of a slowdown in global activity or stronger -than-expected impacts of the
monetary tightening on global disinflation seems less likely, in light of resilient activity
data and the monetary easing cycles underway by several central banks. However, the
Committee pointed out, as a risk in an environment of contractionary rates and
tightened financial conditions, the possibility of a stronger -than-expected domestic
slowdown, which could generate d isinflationary impacts over time. Conversely, the
debate reinforced that the baseline scenario already contemplates a slowdown and
that there is no evidence, even incipient, of an abrupt slowdown. Furthermore, the
trade policy and financial conditions prevailing in the U.S., with uncertain impacts on the
conduct of monetary policy in that country and on global growth, also introduce risks
to domestic inflation, either upside, as previously reported, or downside, as the baseline
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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scenario now incorporated into prices may not materialize. Therefore, the Committee
assessed that the probabilities of the distribution tails of the variables of the external
scenario have increased.
C) Discussion of the conduct of monetary policy
19. Copom then discussed the conduct of monetary policy, considering the set of
projections evaluated, as well as the balance of risks for prospective inflation.
20. The Committee assessed that the shorter -term determinants – such as the
exchange rate and current inflation – and the medium-term determinants – such as the
output gap and inflation expectations – still requires a more contractionary monetary
policy.
21. 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.
Copom also concluded that the previous indication of the anticipation of an adjustment
of the same magnitude at the next meeting was still appropriate.
22. 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
23. The current scenario is marked by additional deanchoring of inflation expectations,
an increase of inflation projections, resilience on economic activity and labor market
pressures, which requires a more contractionary monetary policy.
24. Copom therefore decided to increase the Selic rate by 1.00 p.p. 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. Without
compromising its fundamental objective of ensuring price stability, this decision also
implies smoothing economic fluctuations and fostering full employment.
25. In light of the continuation of the adverse scenario for inflation convergence, the
Committee anticipates another adjustment of the same 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.
26. 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.
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Table 1
Inflation projections in the reference scenario
Year-over-year IPCA change (%)
Price Index 2025 2026Q3
IPCA 5.2 4.0
IPCA market prices 5.2 3.8
IPCA administered prices 5.2 4.6