Brazil: Central Bank decides to hike interest rate for sixth consecutive meeting
July 30, 2015
At its 29 July meeting, the Central Bank’s Monetary Policy Committee (COPOM, Comite de Politica Monetaria) decided to raise the benchmark SELIC interest rate by a further 50 basis points from 13.75% to 14.25%, continuing its tightening cycle. The move was in line with market expectations and represented the sixth consecutive decision to hike rates. As a result, the SELIC interest rate is at a nine-year high.
In the brief accompanying statement, the Bank outlined that the decision to increase the SELIC interest rate was unanimous. In addition, the Bank explained that the hike is consistent with its assessment of the current macroeconomic situation, inflation outlook and current balance of risks. The Bank added that keeping the SELIC rate at this historically high level for a long period is needed to bring inflation down to the target range by the end of next year, signaling a likely end to the tightening cycle.
The move comes just over one week after President Dilma Rousseff announced a large reduction in her government’s primary fiscal surplus target for this year and just days after the Brazilian real plunged to a 12-year low. Policy makers have been trying to shift Brazil’s economy into a higher gear as Latin America’s largest economy has been plagued by stagnating economic growth and high inflation.