Brazil's Central Bank lowers basic interest rate to 12.25% annually

Persistently high prices have prompted the Brazilian Central Bank to lower interest rates for the third consecutive time. The Monetary Policy Committee (Copom) unanimously reduced the Selic rate, the country's basic interest rate, by 0.5 percentage points to 12.25 percent per year.

In a statement on Wednesday (Nov. 1), Copom said that the international economy requires greater attention and caution from emerging countries when reducing interest rates. "The external environment is proving to be adverse, due to the rise in longer-term interest rates in the United States, the resilience of core inflation at still high levels in several countries, and new geopolitical tensions," the statement noted.

Despite these challenges, Copom expressed its intention to continue making further 0.5-point reductions in the upcoming meetings. However, the committee also indicated that it might adjust the timing of the cuts if prevailing conditions complicate the process of reducing interest rates.

This rate is at its lowest level since May last year when it stood at 11.75 percent per year.

Inflation

The Selic rate is the Central Bank's main instrument for keeping official inflation, as measured by the Broad National Consumer Price Index (IPCA), under control. In September, the indicator stood at 0.26 percent and accumulated 5.19 percent over 12 months.

Last year, the IPCA exceeded the upper limit of the inflation target. For 2023, the National Monetary Council (CMN) has established an inflation target of 3.25 percent, with a permissible range of 1.5 percentage points. As a result, the IPCA cannot surpass 4.75 percent or fall below 1.75 percent this year.