Brazil Central Bank Makes Largest Increase in Interest Rates in 18 Years

Selic goes up 1 point and goes to 5.25% per year; Copom signals that it increase it again in September


Facing high prices and consecutive revisions in market expectations for inflation, the Central Bank's Monetary Policy Committee raised the basic interest rate (Selic) by one percentage point, to 5.25% per year.

This is the largest increase since February 2003, the first year of Luiz Inácio Lula da Silva's presidency (PT), when the rate rose from 25.50% to 26.50%. That year, inflation was 9.30%. With this, the Central Bank accelerates the pace of the monetary tightening cycle, which was up 0.75 points.

The Central Bank announced the increase in September and changed the assessment on what level the rate should reach, indicating that it should stay above neutral, which hovers around 6.5%. Previously, the forecast was to stay below this mark.

Entities such as the Confederation National Industry and Federation of Industries of the State of São Paulo criticized the decision.

Translated by Kiratiana Freelon

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