Brazil’s Central Bank cuts benchmark interest rate to 14.75% per year
Despite tensions surrounding the war in the Middle East, the Central Bank of Brazil cut interest rates for the first time in nearly two years.
The Monetary Policy Committee (Copom) unanimously reduced the Selic rate, the economy’s benchmark interest rate, by 0.25 percentage points to 14.75 percent per year.
In its statement, Copom said that increased uncertainty caused by the conflict in the Middle East requires greater caution. The Central Bank did not rule out revising the rate-cutting cycle if necessary.
“The Committee reaffirms its serenity and caution in conducting monetary policy, so that future steps in calibrating the basic interest rate can incorporate new information that provides greater clarity on the depth and extent of the conflicts in the Middle East, as well as their direct and indirect effects on price levels over time,” the statement reads.
Since June of last year, the Selic rate had been at 15 percent per year. The last time Copom reduced interest rates was in May 2024, when the Selic rate fell from 10.75 percent to 10.5 percent. In September of the same year, the rate began to rise, eventually reaching 15 percent.
Inflation
The Selic is the Central Bank’s main tool for curbing Brazil’s official inflation, as gauged by consumer price index IPCA. In February, the index accelerated to 0.7 percent, driven by higher school tuition fees. Despite the increase, the indicator stood at 3.81 percent over the 12 months, below 4 percent for the first time since May 2024.
Under the new continuous target system, in effect since January of this year, the inflation target pursued by the Central Bank, defined by the National Monetary Council, is 3 percent, with a tolerance range of 1.5 percentage points above or below. That is, the lower limit is 1.5 percent and the upper limit is 4.5 percent.
In the continuous target model, the target is assessed month by month, based on accumulated inflation over 12 months.
Selic
The basic interest rate is used in transactions involving government bonds in the Special System for Settlement and Custody (Selic) and serves as a reference for other interest rates in the economy.
