Rio, 1/22/2004 (Agência Brasil – ABR) – The decision by the Monetary Policy Committee (Copom) to leave the country's basic interest rate (Selic) at 16.5% annually caused mostly surprise and frustration in markets yesterday.

According to Luiz Roberto Cunha, the director of the Rio Commercial Federation (Fecomércio/RJ), the decision was "...a big surprise because market expectations were for a further reduction. It seems the Central Bank is unsure of inflation now at the beginning of the year with indexes showing an upward pressure on prices."

Meanwhile the country's two biggest unions, the CUT and Força Sindical, strongly complained about the decision, calling it conservative and one that would put brakes on growth. "There is a balanced economic situation and no risk involved in making a more drastic reduction of the Selic," said Luiz Marinho, the president of the CUT.

The president of the National Industrial Confederation (CNI), Armando Monteiro, declared that he was "apprehensive and, above all, frustrated by the decision." He said it could put renewed growth in check. Monteiro declared that the inflation spike in January, that Copom used to justify the decision to leave the Selic unchanged, was not a sign of inflation getting out of control. "There is simply no reason for the Copom to be so conservative. The rise in demand has been moderate and does not constitute inflationary pressure," said Monteiro. (AB)