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Investing.com -- Brazil’s central bank adopted a more hawkish tone in its latest policy meeting minutes released Wednesday, citing an increasingly adverse external environment despite some improvement in domestic inflation.
The Central Bank of Brazil’s monetary policy committee (COPOM) highlighted that uncertainty has increased due to fiscal and trade policies, even as activity and inflation data in the United States show signs of slowing.
On the domestic front, the committee noted that economic activity is moderating as expected, with the credit market showing clearer signs of cooling. However, the minutes pointed to payroll loans and lower taxation as potential risks to this trend.
Brazil’s labor market remains tight, reaching historic milestones with record-low unemployment and significant real income gains, according to the minutes.
COPOM members expressed their expectation that domestic demand would slow further, which they view as necessary to ensure inflation converges toward the target. The committee acknowledged some marginal improvement in inflation expectations but reinforced its commitment to re-anchoring them.
While current inflation has receded somewhat, the central bank emphasized that it remains above target. After expanding its relevant monetary policy horizon to the first quarter of 2027, the committee noted that inflation is still projected to be above the mid-target at 3.4%.
The minutes reflect the central bank’s ongoing concerns about inflation pressures despite some positive developments in recent economic data.
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