Brazilian Central Bank Raises Interest Rate to 15% Amidst Global Economic Uncertainty

Brazil's central bank has raised the benchmark Selic rate by 25 basis points to 15% per annum. The decision was made due to an adverse and uncertain global economic environment.

Brazil's Central Bank (BCB) has raised the benchmark Selic rate by 25 basis points to 15% per annum, marking the seventh consecutive increase since September 2024. The decision was made in response to ongoing economic uncertainty, particularly in the global arena [1].

The move was unexpected by local markets, which had anticipated the rate to remain at 14.75%. The Monetary Policy Committee (Copom) of the BCB unanimously decided to raise the rate, citing the need to control inflation and stabilize the economy amidst international challenges [1].

Despite a slight decrease in inflation, the BCB remains vigilant and has indicated that future monetary policy steps may be adjusted. The Copom emphasized that it will not hesitate to continue the adjustment cycle if it deems it necessary to ensure inflation convergence to its target [1].

The Selic rate is the primary tool used by the Central Bank to manage official inflation, as measured by the Broad National Consumer Price Index (IPCA). The recent increase aims to curb inflation by making credit more expensive, thereby discouraging production and consumption [1].

The decision comes amidst a backdrop of varying economic forecasts. While the BCB projects official inflation to close 2025 at 5.25%, market estimates are more pessimistic, with some economists predicting a higher figure [1].

The BCB has also revised its economic growth projections for 2025, reducing the estimate to 1.9% due to the impact of higher interest rates on economic activity [1]. In contrast, market analysts are projecting a better growth outlook, with GDP expansion estimated at 2.2% for the year [1].

The Selic rate serves as a benchmark for other interest rates in the economy and is used in government bond trading on the Special Settlement and Custody System. By adjusting it upwards, the BCB seeks to control inflation and stabilize the economy [1].

The Copom's statement also highlighted that the current level of the Selic rate is being maintained for a prolonged period to assess its impact on inflation and economic growth. The committee emphasized that it will remain vigilant and adjust future monetary policy steps as needed [1].

In summary, Brazil's Central Bank has raised the Selic rate to 15% per annum in response to global economic uncertainty, aiming to control inflation and stabilize the economy. The decision was met with surprise in local markets and reflects the BCB's commitment to maintaining a data-driven approach to monetary policy.

References:
[1] https://en.mercopress.com/2025/06/19/brazil-selic-rate-upped-for-the-seventh-straight-time
[2] https://www.investing.com/news/economy-news/brazil-central-bank-raises-rates-by-25-bps-in-seventh-straight-hike-4102231