Brazil Raises SELIC Rate to 11.75%

The Central Bank of Brazil decided to raise the benchmark interest rate by half a point to 11.75 percent on December 3rd amid high inflation, low economic growth and falling currency.

A rate hike was expected by markets as last meeting minutes showed the central bank remains especially cautious in fighting persistently high inflation.

The inflation rate has been above the official target range (4.5 percent with a two percentage points tolerance) since June of 2014 due to an increase in consumer and government spending, wage growth and the depreciation of the real. In an attempt to curb it, the central bank has already increased the benchmark interest rate five times this year.

On November 27th, the re-elected President announced her new economic team: Joaquim Levy, a former Treasury secretary, will be the new finance minister; Nelson Barbosa will be the planning minister and Alexandre Tombini will remain as president of the Central Bank.

Joaquim Levy is known for his liberal and austere policies, earning the nickname of “scissor hands”. During his position as treasury secretary in the former president Lula da Silva’s first term, he managed to bring the budget to a surplus by controlling public expenses. Levy assured he has autonomy to implement the necessary changes and intents to reduce the budget deficit (before interest payments) to 1.2 percent of GDP in 2015 from previously projected 1.9 percent.

Brazil Raises SELIC Rate to 11.75%

Carolina Cunha |
12/4/2014 11:11:30 AM