Brazil’s central bank raised interest rates by 50 basis points on Wednesday, marking the sixth consecutive increase and pushing the benchmark Selic rate to 14.75%—its highest level since August 2006.
The decision was unanimous among board members, including Governor Gabriel Galipolo, and largely in line with expectations, as 32 out of 35 economists surveyed by Reuters had predicted the move. The hike reflects the central bank’s commitment to reining in inflation, which currently stands at 5.49% year-on-year—well above the official target of 3%. Market forecasts remain skeptical that inflation will return to the target even by 2028.
A Prolonged Tightening Cycle
In its latest statement, the central bank emphasized the need for “significantly contractionary monetary policy for a prolonged period” to bring inflation back under control, removing previous phrasing that hinted at an even more restrictive stance ahead. This subtle shift suggests that while tightening remains necessary, the pace may be adjusted depending on incoming data and global economic conditions.
Since September, the central bank has added 425 basis points to the Selic rate. While policymakers acknowledged signs of a “incipient moderation in growth,” they also noted that key indicators such as domestic economic activity and labor market performance continue to show resilience.
The decision comes shortly after the U.S. Federal Reserve chose to hold interest rates steady, adding another layer of complexity to Brazil’s monetary policy calculus amid ongoing global economic uncertainty.
Looking ahead, the central bank reiterated its cautious approach:
“For the next meeting, the scenario of heightened uncertainty, combined with the advanced stage of the current monetary policy cycle and its cumulative impacts yet to be observed, requires additional caution in the monetary policy action and flexibility to incorporate data that impact the inflation outlook.”
The committee will continue to monitor a broad set of metrics—including inflation dynamics, projections, expectations, the output gap, and risk balances—to determine the appropriate path forward. As always, the ultimate goal remains clear: bringing inflation back to target within the relevant horizon.
