First Hike in Brazil’s Selic Interest Rate Since August 2022
September 18, 2024
On the same day that the Federal Reserve initiated a cycle of declining interest rates, policymakers at the Central Bank of Brazil backtracked on their own easing. There had been seven cuts totaling 325 basis points since August 2023, but officials concluded that if the Selic rate were to be left at 10.50%, the medium term inflation target of 3.0% would probably not be secured within the horizon through 2026. They now expect inflation of 4.4% this year, followed by 4.0% in 2025 and 3.5% in 2026 and recognized that risks associated with this path are tilted to the upside. A statement released after a unanimous decision to hike the rate to 10.75% laid out several factors justifying the interest rate increase: “resilient economic activity, labor market pressures, positive output gap, an increase in the inflation projections, and deanchored expectations require a more contractionary monetary policy.”
CPI inflation last month printed at 4.2%, down from a peak of 12.1% in April 2022. The new Selic interest rate is considerably higher than 4.2% but down from a peak of 13.75% sustained for 12 months between August 2022 and August 2023. During the pandemic, the rate had been as low as 2.0% from August 2020 until March 2021.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Brazil
ShareThis
