The Strategist

Brazil's central bank raises key rate by 50 basis points

06/16/2022 - 11:26

"Copom unanimously decided to raise the benchmark interest rate by 0.50 ppt to 13.25% per annum. The committee understands that this decision reflects uncertainty about its scenarios and risk of even greater dispersion than usual for projected inflation," the communiqué reads.

The organization's experts noted the negative revision of global growth prospects in the context of strong and persistent inflationary pressures, as well as tightening of financial conditions caused by the reassessment of monetary policy in advanced economies, which increases uncertainty and creates additional volatility, especially in emerging market economies.

According to experts, inflation will be 8.5 percent this year and 4.7 percent in 2023, with the dollar exchange rate over 4.90 Brazilian reais and an oil price of $110 per barrel by the end of the year.

The new key rate of 13.25 percent set by the Brazilian central bank is the highest since 2016. It has been hiked 11 times in a row by monetary authorities, who want to boost it by 50 points at their next meeting in 45 days.