Brazil Central Bank Set to Raise Interest Rates to 14.25% on March 19

Brazil’s central bank is set to increase the benchmark interest rate to 14.25% on March 19, marking a significant rise in its monetary policy efforts. This increase is seen as necessary to address inflation concerns. Analysts predict further rate hikes in May, indicating a cautious yet firm stance regarding future adjustments as economic indicators remain mixed.

According to a recent Reuters poll, Brazil’s central bank is anticipated to increase its benchmark interest rate to 14.25% on March 19, marking the highest level in nearly a decade. The monetary policy committee, Copom, is expected to implement a 100 basis point hike, representing the third consecutive increase of such magnitude in the ongoing tightening cycle. The move follows governmental measures aimed at addressing inflation concerns under the new central bank governor, Gabriel Galipolo.

The upcoming policy statement from the central bank is expected to provide limited guidance, particularly in light of the mixed economic indicators. Economists forecast that the Selic rate will rise to 14.25%, a peak not seen since September 2016. Leonardo Costa of Asa Investments remarked that the central bank will communicate a slower adjustment pace at the next meeting in May but will not commit to future rate hikes.

Current economic data suggest a slowdown, which is predicted to help reduce the inflation rate from the recent 5.06%, the highest in over a year. Additionally, uncertainty stemming from U.S. tariff policies imposes further challenges, although the Brazilian government is adopting a composed approach. Nearly all experts queried foresee another interest rate increase in May post-Copom’s April recess, with varying expectations regarding the extent of this potential hike.

The peak Selic is forecasted to reach 15.25% in the third quarter, reminiscent of levels last seen in June 2006, before a projected decline toward 15.00% in 2025 and 12.50% in 2026. Economists Gabriel Barros and Johann Soares from ARX Investimentos noted that while significant guidance is not expected at the March meeting, there remains potential for a reduced pace of rate increases in the future.

The anticipated increase in Brazil’s benchmark interest rate reflects the central bank’s unwavering commitment to combat inflation while navigating a turbulent economic environment. With Copom expected to implement a 100 basis point increase, further adjustments are anticipated in the coming months, although clarity on future moves may remain limited. The eventual economic slowdown could provide relief from high inflation rates as Brazil’s policymakers adjust to ongoing global uncertainties.

Original Source: www.marketscreener.com