ISSN 2330-717X

Brazil’s Central Bank Raises Basic Interest Rate To 12.75%

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By Pedro Rafael Vilela

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The Monetary Policy Committee of the Brazilian Central Bank on Wednesday (April 4) unanimously decided to raise the economy´s basic interest rate (Selic) by one percentage point. As a result, the Selic rose from 11.75 percent to 12.75 percent per year, the highest level since February 2017, when it was 13 percent per year.

This is the 10th consecutive increase in the Selic rate. The current cycle of hikes in basic interest began in March 2021. The latest Focus bulletin, in which the bank measures financial market expectations, predicts the basic rate will end 2022 at 13.25 percent per year.

According to a bank´s assessment, the external environment has continued to deteriorate and inflationary pressures arising from the pandemic have intensified due to supply problems caused by the new wave of COVID-19 in China, and the war in Ukraine. The Committee noted that for the next meeting, it shall maintain the monetary tightening, but with a lower rate increase, that is, less than 1 percent.

Inflation

Selic is the Central Bank’s main instrument to keep official inflation under control, as measured by the Broad National Consumer Price Index (IPCA). Despite this, market estimates for inflation have been growing for at least 16 weeks. In March, the IPCA corresponded to 1.62 percent, the highest rate for the month since the beginning of the Real Economic Plan in 1994. In 12 months, the index reached 11.30 percent, almost double the ceiling of the Central Bank’s target, which is to end the year with an inflation rate of 3.5 percent, with a variation tolerance of 1.5 percentage points up or down.

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ABr

Agência Brasil (ABr) is the national public news agency, run by the Brazilian government. It is a part of the public media corporation Empresa Brasil de Comunicação (EBC), created in 2007 to unite two government media enterprises Radiobrás and TVE (Televisão Educativa).

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