Brazil’s Central Bank keeps benchmark interest at 13.75% a year
Despite the drop in inflation and pressures from members of the government, the Brazilian Central Bank decided not to change the country’s benchmark interest rate. Its Monetary Policy Committee unanimously decided to maintain the Selic rate at 13.75 percent a year. The decision was expected by analysts, who anticipate a reduction should not come until August.
In a statement, the committee reported there are still risks surrounding the inflation, such as possible global price pressures and “residual” uncertainties regarding the vote on the so-called Fiscal Framework.
“The committee believes the current landscape requires patience and composure in conducting monetary policy and notes that the future steps in monetary policy will hinge on the progress of inflation dynamics, particularly regarding the components that are most sensitive to monetary policy and economic activity,” the statement reads.
This is the seventh consecutive time that the Central Bank maintains the rate, which has remained at this level since August last year. Previously, the committee had increased the Selic rate 12 times in a row, in a cycle that started amid rising food, energy, and fuel prices.
Inflation
The Selic rate is the main tool used by the Central Bank to curb the nation’s official inflation, as gauged by consumer price index IPCA. The indicator added up to 3.94 percent over the 12-month span in May, down four percent for the first time in two and a half years. In the past two months, inflation has been on the wane due to food and fuel prices.
For 2023, the National Monetary Council has set an inflation target of 3.25 percent, with a tolerance margin of 1.5 percentage points. As a result, the IPCA must not exceed 4.75 percent or sink below 1.75 percent this year.
