After the 1999 currency crisis which led to a drastic depreciation of the real, Brazil has established an inflation-targeting regime for monetary policy. The external anchor implicit in the crawling-peg exchange-rate regime was replaced with a domestic one: control of inflation by means of setting interest rates. Monetary policy is now more clearly structured on the basis of one objective (the inflation-rate target) and one instrument (interest rates).
The index of inflation used for the purpose of setting interest rates is the IPCA - Enlarged Consumer Price Index. Its targets were established a few months after the crisis: 8% in the year 1999; 6% in 2000; and 4% in 2001. A variation of up to 2 percentage points around the target is permissible (so, for example, in 2000 the rate of inflation needed to be kept between 4% and 8%).
This system is similar to the one put in place in the UK and associated to the Monetary Policy Committee of the Bank of England. COPOM is the committee responsible for decisions on interest rates in Brazil. The governor and all directors of the Central Bank sit on the COPOM and have voting rights.
In Brazil, as in the UK, the Central Bank publishes an inflation report on a quarterly basis which serves as a basis for decision-making on interest rates. The minutes of COPOM meetings are also published.
Related links
Brazilian Central Bank - Inflation Report
Brazilian Central Bank - Minutes of the Monetary Policy Committee (COPOM)