Central Bank raises benchmark interest to 14.75% per year
Rising food and energy prices, coupled with uncertainties surrounding the global economy have led the Brazilian Central Bank to raise the country’s benchmark interest rate yet again.
The Monetary Policy Committee unanimously raised the Selic rate—Brazil’s benchmark interest rate—by 0.5 percentage points to 14.75 percent per year.
This was the sixth increase in a row. The rate is at its highest level since August 2006, when it was also at 14.75 percent.
In a statement, the committee gave no clues as to what should happen at the next meeting, in mid-June; it merely stated that uncertainties remain high and should require prudence from the Central Bank.
Inflation
The Selic rate is the Central Bank’s main tool for curbing Brazil’s official inflation, as gauged by the price index IPCA. The indicator is up 5.49 percent in 12 months, therefore above the ceiling for the continuous inflation target.
Under the new continuous target system in force since January, the inflation target to be pursued by the Central Bank, set by the National Monetary Council, is three percent, with a tolerance interval of 1.5 percentage points up or down. In other words, the limits are 1.5–4.5 percent.
In this system, the target is calculated month by month, taking into inflation built up over 12 months. In May 2025, inflation since June 2024 is compared with the target and the tolerance interval. In June, the procedure is repeated, with the calculation starting in July 2024. Thus, the verification shifts over time and is no longer restricted to the closed index in December of each year.
In the latest inflation report, released at the end of March by the Central Bank, the monetary authority raised the IPCA forecast for 2025 to 5.1 percent, but the estimate could be revised depending on how the dollar and inflation perform. The next report should come at the end of June.
The benchmark interest rate is used in government bond trading on the Special System for Settlement and Custody (Selic) and serves as a benchmark for other interest rates in the economy. By adjusting it upwards, the Central Bank curbs the excess demand that puts pressure on prices, because higher interest rates make credit more expensive and encourage savings.
