Brazil's Central Bank lifts benchmark interest rate to 13.25% per year
The recent rise in the dollar and uncertainties about inflation and the global economy prompted the Brazilian Central Bank to raise interest rates again. The Monetary Policy Committee (Copom) unanimously increased the Selic (Special Settlement and Custody System) rate, the country's benchmark interest rate, by 1 percentage point to 13.25 percent per year.
In a statement, Copom noted that external uncertainties, particularly in the United States, cast doubt on the policy stance of the Federal Reserve (Fed, the US central bank). Regarding Brazil, the committee stated that the economy is heating up, with both headline and core inflation—which excludes volatile items like food and energy— exceeding the target. Additionally, uncertainties over public spending have disrupted asset prices.
Regarding upcoming meetings, Copom confirmed it will raise the Selic rate by 1 percentage point at the March meeting but did not indicate whether further hikes will follow in May, stating only that it will monitor inflation. “Beyond the next meeting, the committee emphasizes that the overall scale of the monetary tightening cycle will be guided by the firm commitment to bringing inflation back to the target and will depend on the evolution of inflation dynamics,” it said.
This marks the fourth consecutive Selic rate hike. The rate is now at its highest level since September 2023, when it also stood at 13.25 percent per year. The increase solidifies the ongoing cycle of monetary tightening.
Inflation
The Selic rate is the Central Bank's primary tool for controlling official inflation, as measured by the Broad National Consumer Price Index (IPCA). In December, the index stood at 0.52 percent. According to the Brazilian government´s statistics agency IBGE, despite the reduction in electricity bills, food prices—especially meat and certain fruits—continued to rise.
With this result, the indicator has risen by 4.83 percent in 2024, surpassing last year's target ceiling. Under the new continuous target system, effective as of this month, the Central Bank's inflation target—set by the National Monetary Council—is 3 percent, with a tolerance range of 1.5 percentage points up or down. This means the lower limit is 1.5 percent, and the upper limit is 4.5 percent.
In the continuous target model, the target is calculated monthly, based on inflation accumulated over the past 12 months. In January 2025, inflation from February 2024 onward is compared to the target and its tolerance range. In February, the same process is repeated, starting from March 2024. This approach shifts the verification over time, moving beyond the previous annual index, which was fixed in December.
The basic interest rate is used in government bond trading through Selic and serves as a benchmark for other interest rates in the economy.
