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Montevideo, December 7th 2022 - 12:56 UTC

 

 

Brazil's central bank raises Selic rate to 13,75%, hoping to contain inflation

Thursday, June 16th 2022 - 07:39 UTC
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The challenge for policy makers and Brazilian consumers is surging prices, which the central bank has so far struggled to curb The challenge for policy makers and Brazilian consumers is surging prices, which the central bank has so far struggled to curb

Brazil's central bank raised its benchmark interest rate for the 11th straight time on Wednesday, bringing the Selic rate to 13,75%, in an attempt to contain inflation in Latin America’s biggest economy.

 However the bank slowed the pace of its tightening cycle with an increase of 50 basis points, down from 75 basis points. The increase was in line with market expectations and is the highest since January 2017.

The Brazilian central bank has waged one of the most hawkish anti-inflationary campaigns in the world, rapidly raising the key rate from a record low of 2% in March 2021, hoping to jump-start the economy from the Covid-19 pandemic contraction.

The challenge for policy makers and Brazilian consumers is surging prices, which the central bank has so far struggled to curb. The annual inflation rate dipped 0.4 percentage point in May, but still stands at 11.73%, far above the central bank’s target of 3.5%.

Trying to contain runaway inflation, the central bank made three whopping 150-basis-point rate hikes from October 2021 to February 2022, followed by three 100-basis-point increases.

Painful price increases, especially for food and fuel, have emerged as a key weak spot for President Jair Bolsonaro as he gears up to seek reelection in October.

Analysts forecast Brazil’s annual inflation will stand at 8.89% at the end of the year, according to the central bank’s latest weekly survey.
 

Categories: Economy, Brazil.

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