Brazil's Central Bank Raises Selic Rate to 12.25% for Third Time, Signals Further Increases Amid Inflation Concerns

Dec 12, 2024, 11:40 AM

The Brazilian Central Bank's Monetary Policy Committee (Copom) has raised the Selic rate by one percentage point to 12.25% per year, marking the third consecutive increase in an ongoing monetary tightening cycle. This decision, which was the last under the leadership of Roberto Campos Neto, comes amid concerns over inflation and economic activity. The Copom has indicated that it anticipates two more increases of the same magnitude in January and March 2025, potentially bringing the Selic rate to 14.25% per year. The move reflects a response to a challenging external environment, particularly in the United States, and a domestic scenario characterized by increased inflation projections and robust economic activity. The Central Bank aims to ensure price stability and promote full employment, despite the potential for economic slowdown. This decision was made in the context of a fiscal policy package announced by the Federal Government to contain public spending, which has increased market insecurity regarding fiscal responsibility.