The Central Bank of Brazil raised its Selic rate to 14.75% in May 2025, aiming to control inflation and support employment. Despite signs of economic activity, growth is moderating, with inflation expectations remaining above target. The Committee is cautious, ready to adapt policies amid a challenging global economic environment, particularly due to uncertainties stemming from US trade policies.
In a significant move, the Central Bank of Brazil has decided to increase its Selic rate by 50 basis points, bringing it up to 14.75% as of May 2025. This decision is taken with an aim to bring inflation closer to the established target, signaling a proactive stance against rising prices. The primary focus is, of course, on price stability, but there is also a concurrent intention to diminish economic fluctuations and support full employment.
While economic activity and labor market metrics continue to indicate a degree of dynamism, the growth is starting to show signs of moderation. Both headline and underlying inflation figures, unfortunately, remain stubbornly above the target. The Focus survey’s inflation expectations for 2025 and 2026 illustrate this concern, with anticipated rates standing at 5.5% and 4.5%, respectively. Meanwhile, the Committee’s own inflation projection for 2026 hovers at 3.6% in the reference scenario.
This cautious approach underscores the commitment of the Copom to remain vigilant and ready to adapt its monetary policy as conditions shift. The external environment presents additional challenges, marked by pronounced uncertainty, particularly concerning US trade policy that raises worries about the extent of a global economic slowdown. Such dynamics also affect inflation and the overarching conduct of monetary policy in Brazil.
The Central Bank of Brazil’s decision to raise the Selic rate underscores its commitment to managing inflation and economic stability. With the current environment being laden with uncertainty and inflation expectations exceeding targets, the move signals a comprehensive approach to economic challenges. It remains to be seen how the global landscape, particularly concerning US trade policies, will influence Brazil’s economy moving forward.
Original Source: www.tradingview.com
