Economy

Central Bank lowers benchmark interest to 12.75% a year

This pace of reductions is likely to continue, the institution said

Wellton Máximo

Published on 21/09/2023 - 10:55

Brasília

The behavior of prices has led Brazil’s Central Bank to cut the country’s interest rates, the Selic rate, for the second time in six months. The Monetary Policy Committee unanimously reduced it by 0.5 percentage points, from 13.25 to 12.75 percent a year.

In a statement, the committee said the 0.5-percentage-point cut is consistent with its efforts to bring inflation down to the target in 2024 and 2025. As at the previous assembly, the body reiterated it will continue to make reductions of the same intensity at future meetings.

From March 2021 to August 2022, the committee raised the Selic 12 times in a row, in a cycle of monetary tightening that began amid rising food, energy, and fuel prices. For 12 months, from August last year to August this year, the rate was kept at 13.75 percent a year seven consecutive times.

Inflation

The Selic rate is the Central Bank’s main tool for curbing the official inflation, gauged by Brazil’s consumer price index IPCA. In August, the indicator stood at 0.23 percent and is up 3.23 percent in 12 months. After successive declines at the end of the first half of the year, inflation rose again in the second half.

For 2023, the National Monetary Council has set an inflation target of 3.25 percent, with a tolerance margin of 1.5 percentage points. The IPCA, therefore, should not exceed 4.75 percent or sink below 1.75 percent this year.