The bank is working to control inflation, which has reached a four-year high beyond the target, due to rising food and fuel costs.
Brazil’s central bank raised its benchmark interest rate to 755 basis points and promised a further increase of the same level in June as it moves forward to bring the inflation forecast back to target.
In addition to the estimates of all 39 economists in the Central Bank Bloomberg survey on Wednesday and the guidelines given by policymakers at their previous meeting in March, Salik was unanimously voted to increase the basis by 5 basis points to 3.5%.
“For the next meeting, the committee expects to continue the partial normalization process with a further adjustment of the same level in the degree of financial stimulus,” the bank’s board said in a statement with the decision.
The bank, led by President Roberto Campos Neto, is working to control inflation, which has reached a four-year high beyond the target. Food and fuel spending has risen in recent months, and the government has recently reintroduced emergency assistance that will boost demand. Put together, analysts see consumer prices above targets this year and next, even after unpaid recovery see
David Baker, the Brazilian economist at Bank of America Corporation, said before the bank’s announcement, “pointing to energy and wholesale content as the top drivers of inflation,” is the right decision since.
Helping policymakers fight inflation is a stronger reality. Brazil’s currency rose 5.5 percent last month, making it the biggest gainer in emerging market currencies, making imports less expensive.
Yet consumer prices rose 1.1% year-on-year through mid-April, and many economists see the May reading close to %%. The central bank has targeted annual inflation at 3.7575% this year, with a tolerance range of 1.5 percentage points.
Last month, President Jaycee Bolsonaro’s administration began offering another monthly stipend at a total cost of 44 billion rupees (৮ 7.2 billion). Lawyers have recently indicated that they will try to expand the assistance if the government does not expedite plans for a new social program as the coronavirus has spread across the country.