Brazil Central Bank Expected to Raise Selic Rate to Near a Decade-High
Brazil’s central bank is set to increase its Selic rate to 14.25%, marking a near decade-high. The tightening cycle continues with an expected third consecutive hike of 100 basis points. Experts predict limited guidance in the upcoming policy statement due to mixed economic signals, while a subsequent May rate increase is likely as inflation remains a concern.
According to a Reuters poll, Brazil’s central bank is anticipated to raise its benchmark interest rate, the Selic, to 14.25% on March 19, marking the highest level in nearly a decade. This decision follows a pattern where the Monetary Policy Committee, known as Copom, is expected to implement a consistent increase of 100 basis points for the third consecutive time in its tightening cycle. Governor Gabriel Galipolo’s administration has taken a stringent stance against rising inflation, supported by various government measures to combat economic challenges.
Market analysts predict that the upcoming Copom announcement will provide limited forward guidance due to increasingly mixed economic indicators. The anticipated increase to 14.25% aligns with the expectations of 37 economists surveyed between March 10-13. Analyst Leonardo Costa from Asa Investments suggested, “The central bank will indicate a slower pace of adjustment at the following meeting (in May), without committing to subsequent moves.”
Recent economic data shows signs of a slowdown, which could help reduce inflation, previously recorded at 5.06%, the highest in over a year. The uncertainty surrounding U.S. President Donald Trump’s tariff policies further complicates monetary decisions, although analysts expressed confidence in Brazil’s government managing the adverse effects.
Looking ahead, most analysts foresee another rate hike in May following Copom’s break in April. Out of 22 respondents, 20 expect a rate increase, forecasting varied hikes from a half-percentage point to a complete 100 basis points. The Selic is projected to reach a peak of 15.25% in the third quarter, reflecting levels last seen in June 2006, before gradually decreasing to 15.00% by 2025 and 12.50% by 2026.
In summary, Brazil’s central bank is poised to raise the Selic interest rate to 14.25% on March 19, driven by persistent inflation concerns and current economic conditions. While limited guidance is expected from the upcoming policy statement, future hikes are likely as indicated by expert predictions. The economic landscape remains complicated due to external factors like U.S. tariffs, but analysts maintain optimism about managing inflation effectively.
Original Source: money.usnews.com
