Brazil’s central bank is projected to raise its benchmark interest rate to 14.25% on March 19, amid rising inflation and a mixed economic outlook. This increase marks the third consecutive hike of 100 basis points. Analysts forecast additional hikes in May and a peak rate of 15.25% by the third quarter.
Brazil’s central bank is anticipated to increase its benchmark interest rate to a near decadal high of 14.25% on March 19, according to a Reuters poll. The decision is expected to result in a 100 basis point rise, marking the third consecutive adjustment of that magnitude during the current tightening cycle. Governor Gabriel Galipolo has upheld a stringent position against rising inflation while the government introduces measures to address troubling economic trends.
The monetary policy committee, Copom, is set to elevate the Selic rate to 14.25%, reflecting the same rate seen in September 2016. The forthcoming policy statement is not expected to offer explicit guidance due to a mixed economic landscape. Economist Leonardo Costa indicated that a slower pace of adjustments may be noted during the next meeting in May, without a commitment to future movements.
Recent economic data, showing a slowdown, is anticipated to assist in lowering inflation, which registered at 5.06% last month, the highest in over a year. Furthermore, President Donald Trump’s unpredictable tariff policies contribute additional uncertainty affecting both monetary policy and Brazil’s bilateral trade.
The majority of analysts, 20 of 22 surveyed, predict another rate increase in May following Copom’s April recess. The forecasted future hikes include expectations for a 50 basis point rise by 12 economists, a 75 basis point increase by seven, and one analyst anticipating a full 100 basis point adjustment. The Selic rate is projected to peak at 15.25% in the third quarter, before tapering down to 15.00% by the end of 2025, and reaching 12.50% in 2026.
The anticipated interest rate hike by Brazil’s central bank to 14.25% underscores the commitment to combat inflation amid a mixed economic outlook. With analysts expecting further increases in May and a projected peak of 15.25% rate in the third quarter, the direction of monetary policy remains crucial as uncertainties persist. Observers highlight potential future reductions in the pace of rate hikes, reflecting adjustments to economic conditions.
Original Source: money.usnews.com
