Brazil's Central Bank Hikes Selic Rate to 12.25% for Third Time, Signals More Increases

Dec 12, 2024, 10:38 AM

Brazil's central bank, Banco Central do Brasil, has raised its key interest rate, the Selic, by a full percentage point to 12.25% per year, marking the third consecutive increase in an effort to combat inflation. This adjustment, which was higher than anticipated by financial institutions, reflects a more aggressive monetary policy stance due to recent economic indicators showing inflation above the official tolerance rate of 4.50% and a robust economic activity. The decision was influenced by a challenging external environment, particularly in the United States, and domestic factors like increased inflation projections and economic dynamism. The central bank's Monetary Policy Committee (Copom) anticipates further rate hikes of the same magnitude in the next two meetings in early 2025, aiming to anchor inflation expectations and promote economic stability. The move has sparked a debate among economists, with some questioning the unanimity of the decision and others highlighting the potential impact on economic growth and investor confidence. Brazil's GDP grew by 0.9% in the third quarter, and unemployment hit a low of 6.2%.