Business

Higher interest rates alone won’t protect Brazil from stagflation

Experts say the Central Bank's decision to increase the Selic rate will not have the desired effect on inflation — and that the country's problems are far deeper

stagflation brazil
President Jair Bolsonaro and Economy Minister Paulo Guedes. Photo: Shutterstock with montage by André Chiavassa/TBR

This Wednesday, Brazil’s Central Bank bumped the Selic benchmark interest rate by another percentage point, pushing it to 6.25 percent a year. However, there are concerns that this latest move will be unable to tame inflation or stop Brazil from slipping into the worst possible economic scenario: stagflation. 

A portmanteau of stagnation and inflation, “stagflation” is feared by economists around the world, being characterized by a sluggish economy in which prices don’t stop rising.

With a combination of political and energy crises, analysts in Brazil believe that, even if the country is not in stagflation yet, it will be...

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