Central Bank Raises Interest Rates to Highest Value Since 2011

01/22/2015 - 09h34

The Central Bank has confirmed the rumors, increasing the basic interest rate (Selic) on Wednesday (21) by 0.5%, to 12.25% a year.

This is the third time in succession it has been raised, and Selic is now at its highest since September 2011.

In a statement, the Central Bank said that the decision was unanimous, and taken on account of the macroeconomic situation and the perspectives for inflation.

Analysts say that inflation is the main reason behind the decision.

The problem is likely to be exacerbated by the increases in the cost of transport, fuel and energy which were authorized this month.

The IPCA (the official inflation index) closed 2014 with a rise of 6.41%.

The last focus bulletin, published by the Central Bank on Monday (19), shows that the possibility of an increase in the IPCA has risen for the third week in a row, to 6.67% - higher than the government's target, which is 4.5%, with a margin for error of two percentage points.

According to economists, poor economic performance should make the Central Bank more cautious with Selic increases this year.

Translated by TOM GATEHOUSE

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