Brazil Hikes SELIC Rate to 13.75%

The Central Bank of Brazil raised its key interest rate by 50bps to 13.75 percent on June 3rd, the highest level since December 2008. It is the sixth straight hike as policymakers voiced concern about growing inflation pressure.

The decision was expected by markets as inflation hit a twelve-year high of 8.17 percent in April. 

Rate hike campaign was initiated last September when inflation reached the upper-limit of official target range of 6.5 percent. Since then, the central bank raised the rate by 275 basis points in an attempt to convince the markets it is committed in bringing inflation back to target.

On the other side, businesses are against hikes as they belive high borrowing cost would weight on growth. In fact, Brazilian economy contracted by 1.6 percent year-on-year in the first quarter of 2015, the fourth consecutive time due to fall in domestic demand and investments. The economy is expected to contract between 1.0 and 1.2 percent this year, according to government and IMF projections.

Last week,  the bank surprisingly cut reserve requirements in an attempt to boost mortgages and agribusiness loans.

Brazil Hikes SELIC Rate to 13.75%

Joana Ferreira |
6/4/2015 12:41:40 AM