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Brazil's Central Bank Hikes Selic Rate to 12.25%, Signals Further Tightening

Dec 11, 2024, 09:41 PM

The Brazilian Central Bank's Monetary Policy Committee (Copom) has raised the benchmark interest rate, the Selic, by 1 percentage point to 12.25% per annum, in a unanimous decision. This move, which was unexpected by financial markets expecting a 0.75 percentage point increase, reflects concerns over inflation expectations becoming unanchored. The decision comes as the Brazilian real has weakened against the US dollar, trading at R$6.06. The Copom's statement suggests that two more rate hikes of the same magnitude are anticipated, potentially bringing the Selic rate to 14.25%. This tightening of monetary policy is seen as a response to a challenging external environment, particularly due to the pace of disinflation in the US and uncertainties about the Federal Reserve's future stance. The increase in the Selic rate is expected to have significant impacts on credit availability and cost, affecting both businesses and consumers.