MercoPress. South Atlantic News Agency

Brazil raises benchmark interest to 12.75%, highest level since 2009

Rates are likely to keep rising, as inflation remains at 7.1%, well above the central bank’s target range of 2.5% to 6.5%.

Brazil’s central bank raised its benchmark interest rate to 12.75% Wednesday, the highest level since 2009, as it struggles to get price increases under control amid sluggish economic growth and deepening political turmoil.

 The bank’s monetary-policy committee COPOM voted unanimously to raise the rate by a half point from 12.25%. The bank started the cycle of rate increases in 2013, when the benchmark Selic rate was at 7.25%, and has lifted it 13 times from that level. Rates are likely to keep rising, economists say, as inflation remains at 7.1%, well above the central bank’s target range of 2.5% to 6.5%.

Brazil is one of the few major economies raising rates as BRICS peers such as China and India are loosening monetary policy to prop up economic growth.

The latest hike supports President Dilma Rousseff's drive to rein in inflation that surged to 12-year highs in mid-February. Rousseff is trying to regain the trust of investors who have soured on Latin America's largest economy, which was a Wall Street darling at the start of the decade.

Repeating exactly the same statement from its last meeting on Jan 21, the central bank gave no clear clues on whether it is planning to slow the pace of the rate-hiking cycle or continue at the current pace.

Economists interpreted the terse statement as a signal that the bank will go for another steep rate increase to keep inflation at bay.