MercoPress. South Atlantic News Agency

Brazil's Central Bank raises interest rate to 11.75%, highest since 2017

Brazil's inflation for the year 2021 has reached 10.06%, which was the country's highest in the past six years

Brazil's central bank (BCB) on Wednesday raised its benchmark interest rate by 1 percentage point to 11.75%, a high in nearly five years, in a bid to curb inflation that “continued to surprise” amid pressures exacerbated by the war in Ukraine. Last time with such a high inflation was last April, 2017.

The Selic rate hike, announced by the Monetary Policy Committee (Copom) and in line with market expectations, is the ninth consecutive increase in a year, and marks a slowdown in the pace of increases compared to previous moves.

Rising inflation

Brazil's inflation for the year 2021 has reached 10.06%, which was the country's highest in the past six years, driven mainly by the rise in fuel prices and by the energy crisis, the Brazilian Institute of Geography and Statistics (IBGE) announced on January. It was the highest index since 2015's 10.67%. The results for 2021 were mainly impacted by transport (+ 21.03%), followed by housing (+ 13.05%) and food and beverages (+ 7.94%).

However, contrary to foreign forecasts from multilateral organizations forecasts, Brazil’s Gross Domestic Product (GDP) ended 2021 with a 4.6% growth, totaling 8.7 trillion (about US$ 1,7 trillion at the current rate). The country managed to recover from the slowdown of 2020 when the Brazilian economy shrank 3.9% because of the pandemic.

Based on information from AFP