Central Bank of Brazil Selic Interest Rate Hiked to 11.75% from 11.25%

December 3, 2014

Brazil has been experiencing minimal growth but also inflation that’s higher than the 2.5-6.5% target.  The central bank policy focus since April 2013 has been countering inflation.  After rising 375 basis points from 7.25% to 11.0% in the ensuing year, monetary policy paused for several months until a 25-basis point increase on October 29 to 11.25%.  In an effort to get ahead of the curve, the rate hike this time was by 50 basis points, but officials verbally implied that such an incremental change is not the new norm.  Future policy will be guided by not only inflation and gauges of expected inflation but also by what is done to consolidate Brazil’s excessive fiscal deficit.  Government officials after winning reelection recently have talked the talk about restoring a credible fiscal policy, and central bank officials want to see if the government will also walk the walk.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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