The rise rates of the Central Bank of Brazil up to 20 years of height, leaves the following open steps

Of Marcela Ayres

The Central Bank of Brasilia (Reuters) -Brazil increased on Wednesday interest rates in a sixth consecutive rise that prompted the debt costs to almost 20 years and left future steps open in the midst of world uncertainties and sticky domestic inflation.

The Bank’s monetary policy committee, known as Copom, raised the selection to 14.75% in a unanimous decision, coinciding with the 32 of 35 economists in a Reuters survey.

Political officials emphasized that the current environment calls for a “significantly opposite monetary policy for an extended period” to bring inflation to the goal, leaving an earlier language on the need for a “more opposite” position.

“For the next meeting, the scenario of intense uncertainty, combined with the advanced stage of the current monetary policy cycle and its impacts still accumulated to observe, requires additional precaution in the action of monetary policy and the flexibility to incorporate data that affect the perspectives of inflation,” they added in the declaration of the decision.

Flavio Serrano, a chief economist at BMG Bank, said that the Central Bank left the door open to a smaller rate rise in June if necessary, although he sees it as unlikely.

“My base case is a zero increase in June, with 14.75%. There may be room for a cut at the end of the year, depending on how the prospects evolve,” he said.

In March, the Central Bank had already set the need to adjust this month, although at a slower rate than the previous three 100 base points.

With the move on Wednesday, announced a few hours after the United States Federal Reserve maintained stable rates, but they quoted the risk of increasing inflation and unemployment, the Selica reference rate has reached the highest level since August 2006.

High rates in the sky are released from an annual inflation rate of 5.49%, well above the official goal of 3%, with the skeptical markets that inflation will return to the target even until 2028.

Aggressive narrowing has added 425 basic points to the reference rate since September, but policymakers emphasized on Wednesday that they see “an incipient moderation in growth”, with indicators of national economic activity and the labor market that still have strength.

Global uncertainties

However, however, inflation risk balance is no longer described as inclined to reverse, but rather risks higher than usual on both sides, including a new deflarationist risk linked to the fall of goods prices.

“In fact, the external scenario points to a larger disinflalationist perspective than expected before, which could withstand a pause in monetary narrowing until June,” said Rafaela Vitoria, chief economist of the Lender Inter.