Brazil's Central Bank Projects Additional Interest Rate Increases for Early 2025
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Brasilia, Dec. 18 (NationPress) The Central Bank of Brazil has signaled in the minutes from its latest Monetary Policy Committee (Copom) gathering, made public on Tuesday, that it foresees two more increases to the Selic benchmark interest rate at the beginning of 2025.
The Central Bank attributed this outlook to the recent depreciation of the Brazilian real against the US dollar, which has recently exceeded 6 reals per dollar, alongside negative market perceptions regarding the government's proposed fiscal measures. These elements have notably influenced both price levels and future interest rate forecasts.
During last week's session, Copom enacted an increase of one percentage point to raise the Selic rate to 12.25 percent annually, representing the third successive hike, as reported by Xinhua news agency.
The bank underscored that the deteriorating economic situation necessitates a more stringent monetary policy, prompted by the depreciation of the exchange rate and worries about meeting inflation targets.
Copom will diligently observe how the decline of the real and the prevailing financial conditions affect pricing and economic performance in the future.
The Central Bank pointed out that its policy decisions are primarily guided by inflation predictions rather than immediate data, given that modifications to the Selic rate generally take six to 18 months to affect the economy.
Brazil is aiming for an inflation rate of 3.0 percent, with an acceptable range of 1.5 percent to 4.5 percent.
On the international front, the Central Bank noted that external conditions remain “challenging,” especially with economic uncertainty in the United States and potential repercussions from protectionist policies under the incoming US President Donald Trump, which may impact currency exchange rates and interest rates.
Last Friday, Brazil's Central Bank disclosed that economic activity surged by 3.4 percent over the last 12 months ending in October.
The bank's Economic Activity Index (IBC-Br) recorded a slight increase of 0.1 percent in October compared to the previous month, seasonally adjusted, marking the fourth month of consecutive growth.
The IBC-Br index, seen as a precursor to GDP, also assists the central bank's Monetary Policy Committee in adjusting fundamental interest rates.
The committee has recently lifted the benchmark Selic interest rate to 12.25 percent, continuing its series of increases aimed at curbing inflation.
Inflation reached 4.87 percent for the 12 months concluding in November, exceeding the central bank's official target of 3 percent, with an error margin of 1.5 percentage points.
