The Central Bank of Brazil announced this Wednesday a new rise in its reference interest rate, which went from 7.75 to 9.25%, which represented an increase of 150 basis points, the agency reported.
“Given the increase in its inflation projections and the risk of a de-anchoring of long-term expectations, it is appropriate to significantly advance the process of monetary tightening towards restrictive territory,” said the members of the Monetary Policy Committee (Copom) through of a statement.
For the next meeting on February 1 and 2, the Committee anticipates another adjustment of the same magnitude.
The South American country began its upward rate cycle in March, after maintaining the rate at a historic low of 2% for more than six months to promote the recovery of the economy hit by the Covid-19 pandemic.
But consumer inflation remains high. The price increases were higher than expected.
“The various measures of core inflation are above the range compatible with meeting the inflation target,” said Copom.
In the last 12 months ending in October, inflation accelerated 10.67 percent. The figures are far from the annual goal established by the monetary authority which is 3.75 percent.
Itaú bank predicted Wednesday’s movement considering that “inflationary pressure continues to be intense and widespread.”
“Maintaining the rate of adjustment of 1.5 percentage points and increasing the Selic to a significantly contractionary level will help in the process of slowing down inflation,” Itaú said in a report.
The inflation projections of the Copom in its base scenario are around 10.2% for 2021, 4.7% for 2022 and 3.2% for 2023.
In addition to inflation, the indicators on the performance of the economy published this week showed an evolution below expectations, recognized the members of the organization.
Last week it was revealed that the country’s Gross Domestic Product suffered a 0.1% drop during the third quarter of 2021 compared to the previous quarter. That data was added to a 0.4% drop that it had already had in the period from April to June, according to figures released by the Brazilian Institute of Geography and Statistics.
Vertigo December
The central banks of the big economies face a dizzying December.
The United States Federal Reserve will meet on December 14 and 15; On the 16th it will be the turn of the European Central Bank and the Bank of England, while on December 16 and 17 the Bank of Japan will hold its monetary policy meeting.