Brazil’s central bank raises interest rate by 25 basis points to 10.75%

By Ovunc Kutlu

ISTANBUL (AA) - Brazil’s central bank announced late Wednesday that it raised its benchmark interest rate by 25 basis points to 10.75%.

"The global environment remains challenging due to the inflection point of the economic cycle in the United States, which poses questions about the pace of economic deceleration, disinflation and, consequently, about the Fed's monetary policy stance," the bank’s Monetary Policy Committee (Copom) said in a statement.

The interest rate decision comes despite Brazil's consumer inflation slowing down in August.

Consumer prices annually increased 4.24% in August, slowing the pace from a 4.5% year-on-year gain recorded in July, according to the Brazilian Institute of Geography and Statistics (IBGE).

On a monthly basis, the consumer price index decreased 0.02% in August, after a 0.38% month-on-month increase in July, IBGE figures showed.

Copom, however, said that headline inflation as well as various measures of underlying inflation have been above the inflation target in recent months.

"The Committee judges that the risks to its inflation scenarios are tilted to the upside," said the statement.

Banco Central do Brasil had last implemented a rate hike of 50 basis points in August 2022, bringing the rate to 13.75%, the highest since early 2017 and up sharply from a record low of 2% in March 2021.

It lowered the interest rate by 50 basis points to 13.25% in August 2023, its first rate cut in three years.

The central bank lowered its benchmark interest rate on May 8 by 25 basis points to 10.50%.