Brazil's Central Bank Unanimously Raises Selic Rate to 12.25%, Signals Two More Hikes

Dec 11, 2024, 09:42 PM

The Brazilian Central Bank's Monetary Policy Committee (Copom) concluded its last meeting of the year by deciding to raise the country's benchmark interest rate, the Selic, by one percentage point to 12.25% per annum. This decision was unanimous among the nine directors of the Central Bank and was higher than market expectations of a 0.75 percentage point hike. The move places Brazil as having the second-highest real interest rate in the world. The Central Bank's actions signal its intent to continue tightening monetary policy, with expectations of two more rate hikes of the same magnitude in the upcoming meetings, potentially reaching 14.25%. The decision comes amidst concerns over inflation expectations becoming unanchored, as noted by Rafaela Vitória, chief economist at Banco Inter. The Central Bank's actions are seen as a response to an imbalanced economy and worries over fiscal management under President Lula's administration.