Brazil’s central bank has increased its basic interest rate by 0.25 percentage points, raising it to 10.75%. This move marks the first instance of monetary tightening under President Luiz Inácio Lula da Silva. The decision was influenced by stronger-than-anticipated labor market conditions and robust economic activity. The last increase in the Selic benchmark rate occurred in August 2022.
This action contrasts with the stance of the US Federal Reserve and several regional counterparts. Recent forecasts indicating upward trends in Brazil’s growth and inflation, alongside fiscal concerns, have exerted pressure on the central bank to implement this rate hike.
A new governor, selected by President Lula, is expected to assume office next year. President Lula has previously voiced criticism regarding the high borrowing costs.
