Brazil’s central bank plans to hike interest rates to 14.25% on March 19, amid rising inflation and economic uncertainty. The tightening cycle will likely continue, with predictions of an increase in May. The long-term outlook sees a peak rate, followed by gradual reductions over the next few years.
Brazil’s central bank is set to raise its benchmark interest rate to 14.25% on March 19, marking a near-decade high, according to a Reuters poll. The monetary policy committee, known as Copom, is expected to lift the Selic rate by 100 basis points, following a series of similar increases as part of a tightening cycle.
Under the leadership of governor Gabriel Galipolo, the Banco Central do Brasil is maintaining a strong stance against persistent inflation, which reached 5.06% last month, its highest in over a year. Although recent economic data suggest a slowdown, the central bank is likely to provide limited forward guidance in their upcoming statement.
The March 19 decision marks the highest Selic rate since September 2016. Almost all economists who participated in the poll predict another increase in May, with some variations on the size of the hike expected. Current forecasts show the Selic peaking at 15.25% in the third quarter before a decline in subsequent years.
Analysts also express concerns regarding the impact of U.S. economic policies under President Donald Trump, especially on trade relations. Policymakers are cautious amid these uncertainties and expect a slower adjustment pace in future meetings. Notably, the outlook remains mixed as Brazil navigates these economic challenges.
In summary, Brazil’s central bank is poised to raise interest rates to 14.25% to combat rising inflation, marking a significant adjustment in monetary policy. Despite anticipated hikes, economists foresee a potential slowdown in the pace of adjustments due to mixed economic signals and external uncertainties. The forecast indicates a peak Selic rate in the third quarter, with eventual reductions expected in the following years.
Original Source: www.marketscreener.com
