Brasília, May 20, 2004 (Agência Brasil) - The decision by the Central Bank's Monetary Policy Committee (Copom) to maintain the benchmark overnight interest rate (Selic) at 16% per year was considered a prudent move to avoid economic instability in the short run. In a note released yesterday (19) by the Central Bank, the Copom says that the decision is intended "to avoid persisting oscillations in internal economic variables."

"Given the recent instability, it is recommendable that the monetary authorities act prudently," the president and directors of the Central Bank explained in the note.

In their view, "the [ideal] setting for the evolution of the Brazilian economy in the coming months combines continuity in the revival of economic activity that has occurred since the second half of last year with the convergence of inflation towards the trend defined by the targets set by the government."

Of the Copom's nine members - the president of the Central Bank and eight directors - six voted in favor of maintaining the Selic at 16%, while three advocated reducing it to 15.75%.

Translator: David Silberstein