Third Central Bank of Brazil Rate Hike of Full Percentage Point Since December – Currency Thoughts

Third Central Bank of Brazil Rate Hike of Full Percentage Point Since December

March 19, 2025

The Brazilian Selic interest rate was lifted at today’s scheduled review to 14.25% from 13.25%. This third such increase within four consecutive meetings of COPOM establishes the highest level since October 2016 and 375 basis points above the 10.5% level seen in 2024 from May until September. CPI inflation of 5.1% in February was at a 5-month high and above the ceiling of the Central Bank of Brazil’s 1.5-4.5% inflation target ceiling, thus warranting the following comment in today’s released statement:

The current scenario is marked by additional deanchoring of inflation expectations, high inflation projections, resilience on economic activity and labor market pressures, which requires a more contractionary monetary policy.

An additional problem stems from the “the economic policy and outlook in the United States, mainly due to the uncertainty about the trade policy and its effects,” raising questions about the pace of economic deceleration, disinflation, the Federal Reserves monetary policy stance, and the pace of growth in other countries like Brazil.

The statement signals that even if economic trends evolve as central bank officials suspect there will be yet another interest rate increase at the next scheduled meeting of COPOM, but that the size of that move is likely to be less than those today and the previous two tightenings.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Central Bank of Brazil

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