selic rate

Interest rates might need an “adjustment” to stem the rise in consumer prices, Brazil’s central bank has said. The country’s key selic rate has increased several times since the cuts that followed the financial crisis, but levelled off at 10.75 per cent in June.

The Bank’s inflation report, released yesterday, suggested such a rise was imminent:

Under the inflation targeting regime, deviations in projected inflation from the target of such magnitude suggest the need for implementation, in the short-run, of an adjustment in the basic interest rate, in order to control the growth pace mismatch between the domestic demand and the productive capacity of the Brazilian economy, as well as to reinforce the anchorage of inflation expectations.

Some analysts have interpreted this as a January rate rise.

Banco Central do Brasil explained that the balance of risks associated with inflation had “evolved unfavorably since the release of last Report”. Read more