Brazil benchmark interest kept at 13.75% a year
The reduction in Brazil’s inflation has led the country’s Central Bank to break a streak of rising interest rates that lasted a year and a half. By seven votes to two, its monetary policy committee Copom maintained the Selic, Brazil’s benchmark interest rate, at an annual 13.75 percent.
In a note, the committee formed by bank directors point out that “the future steps of monetary policy may be adjusted,” adding the committee “will not hesitate to resume the increasing cycle if deflation does not run its course as expected.”
The rate remains at its highest since January 2017, when it was also at a yearly 13.75 percent. This is the first interruption in increments after 12 hikes in a row—a sequence that started amid swelling food, energy, and fuel prices.
Inflation
The Selic is the financial authority’s main tool for curbing Brazil’s inflation, as gauged by consumer price index IPCA. In August, the indicator was up 8.73 percent from 12 months prior. This is the second consecutive month with deflation, brought on by shrinkage in energy and gasoline prices.
Despite the recent slowdown, the value is above the ceiling of the inflation target. The National Monetary Council had set an inflation target of 3.5 percent for 2022, with a tolerance margin of 1.5 percentage points. The IPCA, therefore, should not have exceeded five percent this year nor sunk below two percent.
