Brazil’s central bank is projected to adjust its Selic interest rate to 14.25% on March 19, the highest since 2016. The increase comes amid inflation concerns and economic slowdown. Analysts expect a further rate hike in May with a predicted peak of 15.25% later in the year before a decrease.
Brazil’s central bank is anticipated to increase its benchmark interest rate to 14.25% on March 19, which would mark the highest level in nearly a decade. According to a Reuters poll, the Copom, Brazil’s monetary policy committee, aims to raise the Selic rate by 100 basis points, representing the third consecutive hike of this magnitude in the tightening cycle. Under the leadership of newly appointed Governor Gabriel Galipolo, the bank has adopted a stringent approach in response to rising inflation amid various government initiatives.
Despite expected adjustments, the forthcoming policy statement is likely to provide limited guidance, considering the varied economic indicators. This rate increase would bring the Selic to its highest level since September 2016. Economist Leonardo Costa of Asa Investments notes that while the central bank will indicate a slower adjustment pace at the next meeting in May, it will refrain from committing to future moves.
Current data reflects a sustained economic slowdown, which could aid in reducing inflation—currently standing at 5.06%, the highest rate seen in over a year. Compounding this uncertainty is U.S. President Donald Trump’s unpredictable tariff policies that are influencing both monetary policy and bilateral trade relations. Among analysts surveyed, 20 out of 22 expect the central bank to implement another increase in May following Copom’s expected April recess.
Projections indicate the Selic rate may peak at 15.25% in the third quarter before beginning to decline, with forecasts placing it at 15.00% by the end of 2025 and 12.50% by 2026, as per median estimates from the poll. Economists Gabriel Barros and Johann Soares from ARX Investimentos suggested there might be an opportunity for a reduction in the pace of rate hikes, although no new guidance is forthcoming from the March 19 meeting.
In summary, Brazil’s central bank is set to raise the benchmark Selic interest rate to 14.25%, its highest since 2016, amid ongoing inflation concerns and a changing economic climate. The Copom is expected to signal a slower pace of rate adjustments in the future while economists predict a peak of 15.25% by the third quarter of 2023, followed by gradual declines. The upcoming rates and economic indicators will play a crucial role in shaping Brazil’s monetary policy strategies going forward.
Original Source: www.marketscreener.com
