Brazil’s central bank is expected to increase its benchmark interest rate to 14.25% on March 19, 2025, due to inflation concerns. The monetary policy committee, Copom, has kept up an aggressive tightening cycle under governor Gabriel Galipolo. Analysts are predicting further hikes in May, with a forecast of a peak rate of 15.25% in the third quarter before potentially tapering off afterwards.
Brazil’s central bank is set to raise its benchmark interest rate to 14.25% on March 19, 2025, as indicated by a Reuters poll. This represents a significant increase by 100 basis points, marking the third consecutive rise of this magnitude amid an inflation crisis. The policy committee, known as Copom, has maintained a stringent approach under new governor Gabriel Galipolo to counter rising inflation, alongside various government initiatives.
Despite the anticipated rate hike, Copom’s upcoming policy statement is expected to lack extensive guidance on future adjustments due to mixed economic signals. Economists widely anticipate this rate will be the highest since September 2016, reflecting the bank’s response to inflation, which was reported at 5.06% last month, the highest in over a year.
Looking ahead, most analysts foresee further rate increases in May, following an April recess. Of the 22 analysts surveyed, 20 expect another rate hike, with projections of either a 50, 75, or 100 basis point increase. The forecast suggests the Selic rate might peak at 15.25% in the third quarter, before declining gradually to 15.00% in 2025 and 12.50% in 2026, according to quarterly estimates.
The anticipated rise of Brazil’s Selic rate to 14.25% next week reflects ongoing inflation concerns and the central bank’s aggressive stance. While the immediate future indicates more increases may be forthcoming in May, the mixed economic landscape complicates projections. With inflation trending downwards, there may also be potential for reduced rates in the long term as policies adjust.
Original Source: money.usnews.com
