Brazil’s central bank mulls raising benchmark interest rate

BRASILIA (XINHUA) – The Central Bank of Brazil’s Monetary Policy Committee (Copom) is evaluating the possibility of raising the benchmark interest rate to counter persistent inflationary pressures on the economy, the committee revealed on Tuesday.

According to the minutes of the committee’s meeting last week, when the Copom raised the benchmark rate from 3.5 to 4.25 per cent annually, committee members even considered increasing the rate by one percentage point.

The minutes also showed the committee expects to raise the rate by another 0.75 percentage points at its next meeting.

“A deterioration in inflation expectations for the relevant period could require a more specific reduction of monetary stimulus,” the document said.

“This assessment will also depend on the evolution of economic activity, the balance of risks and how these factors affect inflation forecasts,” it added.

In considering the various “alternative scenarios,” the best strategy is to maintain the current rate of reducing stimulus, with the possibility of a “more timely” adjustment at the next meeting, the Copom said. The policymakers noted that fiscal and monetary stimulus adopted abroad “are promoting robust economic growth and that the latest inflation reports have surprised several countries, both developed and emerging”.

Brazilian economic activity shows strength, with inactivity reduced faster than expected, they said.

“Despite the intensity of the second wave of the (COVID-19) pandemic, the latest available data continues to surprise positively,” they added.

A pedestrian walks past a store in Sao Paulo, Brazil. PHOTO: XINHUA