Brazil’s benchmark interest at 6.5% a year for third time

For the third time in a row, the Brazilian Central Bank kept the economy’s benchmark interest rate unaltered. The Monetary Policy Committee unanimously decided to keep the Selic at 6.5% a year on Wednesday (Aug. 1). The move had been expected by financial analysts.

Thus, the rate continues to be the lowest since 1986, when the current time series began. From October 2012 to April 2013, the rate was held at 7.25% and faced gradual hikes until it reached 14.25% in July 2015. In October 2016, the Central Bank once again took to cutting the Selic until it sank to 6.5% per annum in March 2018.

In May, the Central Bank broke a succession of cuts and kept the Selic at 6.5% in a decision that took the financial market by surprise. At the time, the monetary authority argued that international instabilities, which reflected on a more expensive dollar in the last months, played a significant role in the decision.

The Selic is the Brazilian Central Bank’s main tool for curbing the country’s official inflation, as measured by the National Broad Consumer Price Index—the IPCA. The IPCA stands at 4.39% June-on-June, lower than the center of the target set for inflation, 4.5%.

The rate, however, was the highest for June since 1995 due to the stoppage carried out by truck drivers, which brought about product scarcity and price hikes.

Until 2016, the National Monetary Council had set the target for inflation at 4.5%, with a tolerance margin of two percentage points. For 2017 and 2018, the council lowered the margin to 1.5. This year, therefore, the inflation must not go beyond 6% or below 3%.