The Central Bank of Brazil has raised the Selic rate by 50 bps to 14.75% in May 2025 to stabilize inflation and support economic conditions. Both inflation expectations and growth remain concerns amid a challenging external environment, particularly regarding US trade policy.
In a significant monetary policy move, the Central Bank of Brazil has increased its Selic rate by 50 basis points, bringing it to 14.75% as of May 2025. The primary motivation behind this adjustment is to steer inflation towards the central target, yet there are other considerations at play, such as stabilizing economic fluctuations and bolstering full employment across the nation.
Despite the ongoing economic activity and reasonably favorable labor market indicators, growth is showing signs of moderation. Furthermore, both headline and underlying inflation rates remain stubbornly above the target levels, prompting these preemptive measures by the Bank. As it stands, inflation expectations for 2025 and 2026, according to the Focus survey, hover over the target at 5.5% and 4.5%, respectively.
In terms of projections, the Monetary Policy Committee, known as Copom, anticipates an inflation rate of 3.6% for 2026 under its reference scenario. The Committee has expressed a cautious stance, signifying its readiness to modify policy approaches should conditions evolve in unexpected ways. There is heightened uncertainty in the external environment, particularly linked to US trade policy, which exacerbates concerns about potential global economic slowdown and its varying effects on inflation and monetary policy actions in Brazil.
In summary, the Central Bank of Brazil’s decision to raise the Selic rate to 14.75% reflects its commitment to controlling inflation while also navigating the challenges posed by a fluctuating economy and external uncertainties. The continued vigilance of the Monetary Policy Committee emphasizes the dynamic nature of economic conditions and acknowledges the risks of global influences, particularly from the United States.
Original Source: www.tradingview.com
