Central Bank keeps benchmark interest rate at 15% per annum
Brazil’s Central Bank decided to keep the economy’s benchmark interest rate – the Selic – at 15 percent. The announcement was made Wednesday evening (Sep. 17), after a two-day meeting with the bank’s president and its directors, who form the Monetary Policy Committee.
In its official statement, they justified the move mentioning uncertainty in the environment abroad “due to the economic situation and policy in the US.” This, the note continues, requires caution “on the part of emerging countries in an environment marked by geopolitical tension.”
The domestic scenario was also mentioned. Economic activity indicators show “moderate growth,” despite the “dynamism” of the labor market, and inflation expectations for 2025 and 2026 remain above target, at 4.8 and 4.3 percent respectively, as per the Focus market readout, which the bank conducts with the financial market. The official target is three percent for each year.
This was the committee’s sixth meeting this year. The rate will remain in effect for the next 45 days, when a new meeting will be held.
Selic
To achieve its inflation target, the Central Bank uses the Selic as its main instrument. When the committee raises the benchmark interest rate, it does so in a bid to curb heated demand levels, which has an impact on prices as higher interest rates make credit more expensive and encourage savings.
Banks consider other factors besides the Selic rate when setting interest for consumers – including default risk, profit, and administrative expenses.
Thus, higher rates can also hinder economic expansion. When the Selic is reduced, credit tends to become cheaper, encouraging production and consumption, reducing control over inflation, and stimulating economic activity.
