Brazil continues with its tightening of monetary policy by raising interest rates by 150 basis points for the third consecutive time.
One more hike. The Brazilian Central Bank raised the basic interest rate by 1.5 percentage points, following a trend by the world’s central banks to control inflation.
With the unanimous decision of the Economic Policy Committee (Copom) of the Central Bank, interest rates remain at 10.75%, the highest level recorded in five years and becomes the eighth consecutive rise of the issuer.
In December, the Central Bank had announced its intention to raise interest rates, motivated by curbing inflation of 10.6% at the end of 2021.
For some analysts, the decision could increase the cost of money and worsen the current technical recession that the country is experiencing, since, by making credits more expensive, the economy slows down and public debt expenses increase.
During the last meeting, Copom maintained its policy of sharply raising rates, which first rose by one percentage point, but since last October it has opted for a rise of one and a half percentage points.
“The Committee understands that this decision reflects its reference scenario and a balance of risks of variation greater than usual for prospective inflation and is compatible with the convergence of inflation for the goals throughout the relevant horizon, which includes the calendar years 2022 and, to a greater extent, 2023,” the bank reported in its press release.
The forecasts of the Central Bank’s Focus bulletin estimate that inflation will slow down in 2022 and will stand at 5.38% at the end of the year, a figure even higher than the inflation target forecast by the bank.
The Central Bank also warned that interest rates could rise to 12% in the first half of this year and close at 11.75%, although the real reduction would occur in 2023 with 8%.