- Brazil's central bank raised its key interest rates by a whole percentage point, its biggest hike since 2003, and promised another increase of the same magnitude in September as the country's economic reopening and a severe drought raise market expectations that inflation will remain above the target level through next year.
Policymakers lifted the Selic to 5.25% of Tuesday, forecast by all but two of the 41 analysts surveyed by Bloomberg. The remaining economists forecast a fourth straight expansion of 75 basis points.
In a statement accompanying the next meeting, the Committee foresees another adjustment of the same magnitude, policy makers wrote to the committee. Future policies steps may be adjusted to ensure the achievement of inflation target.
The Brazilian central bank, led by its president Roberto Campos Neto, has been among the most aggressive in the world, increasing rates by 325 basis points since March. Price pressures are mounting but local officials roll back the last few virus restrictions in place, forcing policy makers to make an even stronger effort to hit inflation target next year.
'In Brazil, inflation drivers include food staples and the effects of the climate crisis seen from drought, Alejandro Cuadrado, Latin America strategist for Banco Bilbao Vizcaya Argentaria Bilbao Vizcaya Argentaria SA, said ahead of the rate decision. 'Brazil is the only country in the region that has consistently been aggressive on rates.
Annual inflation hit 8.59% in mid-July, above last year's 3.75% target. Analysts surveyed by the monetary authority expect consumer prices to reach target both this year and next, as they expect borrowing costs to rise to 7% in December.
Although the virus kills almost 1,000 people in Brazil a day, that is down from a peak of more than 4,200. Hospital occupancy rates have decreased, with intensive-care units around the nation about 60% to 65% full, down from more than 95% earlier this year.