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On 2 February, Brazil’s central bank lifted its overnight interest rate by 1.5 percentage points, the third recent increase of that size, raising it to 10.75 percent as the bank struggles to contain an inflation rate that rose to 10.2 percent last month.
The bank has raised the rate by 8.75 percent points in the past 12 months.
The bank acted after consumer prices edged up again in January.
The higher rates seem to be having their intended effect: retail sales, a key driver of Brazil’s economy, has edged down in each of the past three months and December’s industrial production rose for the first since May 2021.
The latest rate increase “leaves the door open for a milder hike in March,” Alberto Ramos, chief Latin America economist for Goldman Sachs, said to Yahoo.
“A more moderate rate hike would be justified by below-trend real GDP growth, uncertain COVID backdrop, lagged effects of recent monetary tightening, and a better anchored real,” the Brazilian currency, he said.
TREND FORECAST: With presidential elections on the horizon and political instability having become the national norm, we forecast the nation will continue to teeter on recession. The nation is deep in debt and there are few options that will generate strong economic growth.