SAO PAULO (Reuters) - Brazil's central bank on Wednesday raised its benchmark Selic interest rate to 11 percent from 10.75 percent, prolonging its cycle of tightening after a surge in food prices that has stoked already high inflation in an election year.
The decision by the central bank's monetary policy committee to raise the key rate by 25 basis points to its highest level in over two years was unanimous. All of the 62 analysts surveyed by Reuters predicted the hike.
The following are analysts' comments:
EDUARDO VELHO, CHIEF ECONOMIST, INVX GLOBAL PARTNERS
"There are uncertainties over the intensity of (the effects of) monetary tightening on inflation. By removing the word 'continuing' from the statement, the Copom increases the likelihood of the Selic remaining stable. But in any case, the next step is uncertain. The central bank is in a tight spot. It's difficult for the Copom to stop raising rates while the impacts of monetary tightening, of the recent strengthening of the real and the deterioration of growth aren't reducing the current inflation level. For the Copom to endorse a stable Selic in May, you would have to see inflation surprise to the downside."
JOSE FRANCISCO DE LIMA GONCALVES, CHIEF ECONOMIST, BANCO
"There was a lot of change for such a brief, terse message. There will probably be another rate increase in the next meeting, if there are no surprises, but the continuation of the cycle beyond that is unlikely. There are too many caveats."
ALESSANDRO DEL DRAGO, CHIEF ECONOMIST, MAUÁ SEKULAR
"The big surprise is the statement ... By including the phrase 'at this moment,' the central bank is signaling that it may stop what it has been doing.
"The central bank is indicating it is leaning toward ending the (rate-hiking) cycle at the next meeting.
"Inflation expectations should not react positively to the decision."
FLAVIO SERRANO, ECONOMIST, ESPIRITO SANTO INVESTMENT BANK
"It was a bit surprising due to the change in the statement. It looks like the central bank is setting up the option to end its monetary policy tightening, but I think it depends very much on the short-term outlook. If inflation were falling more quickly, this would have perhaps been the last move. If the situation stays bad, it could carry out another 25-basis-point increase, but it won't be more than that."
MAURICIO MOLAN, CHIEF BRAZIL ECONOMIST, SANTANDER
"The central bank is not committing itself to the continuation of the tightening cycle. If data permits, it is inclined to stop the cycle at some point over the next meetings.
"Upcoming inflation data will probably show a very dangerous outlook, however. This will make the central bank raise interest rates again at its next meeting by 25 basis points."
GUSTAVO MENDONCA, ECONOMIST, SAGA CAPITAL
"It was more dovish than the market was expecting, the fact that it changed the statement. Removing the 'continuing the adjustment' phrase and adding that it will 'monitor' are two signals that the bank wants to stop here. For the bank to continue hiking at the next meeting - which would be 25 basis points - inflation will have to worsen significantly."
ROBERT WOOD, BRAZIL ANALYST, ECONOMIST INTELLIGENCE UNIT
"The wording has changed and the central has gone into data-watching mode, which signals that the tightening cycle has either ended or is nearing its end."
(Reporting by Brazil Newsroom; Editing by G Crosse and Lisa Shumaker)