Brazil’s Central Bank will raise the Selic rate to 14.25% on March 19, a near-decade high. This follows a series of substantial hikes aimed at counteracting inflation, with predictions of a more cautious approach ahead. Economic indicators suggest ongoing challenges, and analysts expect further adjustments in May. The Selic rate is projected to peak at 15.25% in Q3 2025 before a gradual reduction.
The Central Bank of Brazil is anticipated to increase its benchmark interest rate to 14.25% on March 19, marking a near decade-high, as highlighted by a recent Reuters poll. The monetary policy committee, known as Copom, is expected to implement a 100 basis point hike, representing the third consecutive increase at this magnitude during the current tightening cycle. Governor Gabriel Galipolo has taken a firm approach to address rising inflation and has implemented various government measures to confront these challenges.
While the bank has previously suggested future adjustments, the forthcoming policy statement may provide limited insights into upcoming decisions due to mixed economic data. The Selic rate, increased by one percentage point, will reach levels not seen since September 2016, according to the economists surveyed between March 10-13. Economists project a slower pace of rate hikes in subsequent meetings, particularly in May, without committing to specific future movements.
Recent economic indicators suggest a continuous slowdown, which should contribute to a decrease in inflation that reached 5.06% last month, the highest in over a year. Furthermore, uncertainties stemming from U.S. President Donald Trump’s tariff policies are likely to impact monetary conditions and bilateral trade with Brazil.
Analysts are largely predicting another rate hike in May, with 20 out of 22 indicating this possibility. The anticipated adjustments vary, with 12 foreseeing a half-percentage point increase, seven predicting a 75 basis point hike, and one expecting a 100 basis point rise. Projections suggest the Selic will peak at 15.25% in the third quarter, before declining to 15.00% in 2025 and 12.50% in 2026 based on median estimates.
Economists from ARX Investimentos noted that while further guidance on the rate hikes might not be provided on March 19, there exists potential for a reduction in the escalation of rate hikes in the near future. This evolving landscape underlines the complexity of Brazil’s economic environment and monetary policy framework.
The Central Bank of Brazil is set to implement a significant interest rate hike to combat rising inflation while navigating complex economic conditions. With projections of continued increases in the Selic rate, analysts anticipate a slower approach moving forward. The pervasive uncertainties in international trade and domestic economic indicators will influence future monetary policy decisions, highlighting the dynamic nature of Brazil’s economic landscape.
Original Source: money.usnews.com
