Reuters
[Source: Reuters]
Brazil’s central bank on Wednesday kept interest rates unchanged at a second consecutive policy meeting, as expected, flagging a need for “more vigilance” in monetary policy due to worsening inflation expectations and recent market swings.
The bank’s rate-setting committee, known as Copom, held the Selic benchmark interest rate at 10.50% in a unanimous decision, in line with forecasts from all 40 economists polled by Reuters.
Inflation has outpaced expectations and Brazil’s currency has depreciated nearly 4% since the bank’s last policy meeting in mid-June, flirting with more than two-year lows amid investor concerns about fiscal discipline.
Citi analysts said they still expect the Selic rate to be held at 10.50% in coming meetings, despite the rising risks on the inflation outlook.
Inflation projections for this year climbed to 4.10% in the latest central bank survey, more than a full percentage point above the 3.0% center of the official policy target.
Sticky services inflation also pushed up consumer prices more than forecast in the month to mid-July, driven up higher fuel and airfare costs.
The central bank kept rates unchanged even as Brazil’s President Luiz Inacio Lula da Silva has repeatedly pushed for a lower Selic.
At an official event in Mato Grosso state on Wednesday, Lula said minutes before the central bank decision that inflation is under control and that interest rates need to be reduced.
The central bank on Wednesday raised its base scenario inflation projections to 4.2% this year and 3.6% for 2025, up from 4% and 3.4% previously.
The monetary authority on Wednesday published its first price increase projections for the first quarter of 2026, seeing an inflation rate of 3.4% under its base scenario.
