Base interest rate increased to 11% p.a.
Brazil's base interest rate (“SELIC”) has been adjusted for the ninth consecutive time. In a unanimous decision, the Monetary Policy Committee (COPOM), a panel of Central Bank directors, increased the SELIC rate by 0.25 percentage points to 11% per annum. This adjustment is set within a hike trend that began in April 2013 with the aim of curbing inflation.
As Brazil's monetary policy maker, the Central Bank uses the SELIC rate to keep the official inflation rate within the target set by the economics panel – i.e. 4.5% per annum, with a sample margin error of plus or minus two percentage points. In February, the annualized inflation rate hit 5.68%, up from the 5.59% accumulated through January.
However, the increase in SELIC stands in the way of an economic pickup as the economy grew 2.3% last year and still relies on government stimulus in the form of tax reliefs and cheap credit.
The interest rate applies to public bond trading within the so-called Special Clearance and Escrow System (SELIC) and provides a benchmark for other interest rates in the economy. Adjustments are designed to contain excessive demand by making credit more expensive, in order to control inflationary pressures. When the base rate is reduced, credit becomes cheaper, which boosts production and consumption, but inflation control loosens.
Translated by Mayra Borges
Fonte: Base interest rate increased to 11% p.a.
