The Brazilian Central Bank published the minutes of last week’s Monetary Policy Committee meeting and, as expected, the bank confirmed that the upward trend in benchmark interest rates will continue. The committee has raised the benchmark Selic rate by at least 0.75 points in each of its last five meetings — taking it from 2 to 6.25 percent.
By year-end, the Selic rate is expected to hit 8.75 percent.
The bank said: “This scenario assumes a path for interest rates to rise to 8.25 percent in 2021 and to 8.50 percent during 2022, dropping to 6.75 percent during 2023. In this scenario, inflation projections for administered prices are 13.7 percent for 2021, 4.2 percent for 2022, and 4.8 percent for 2023. Electricity tariffs are assumed to [remain at] ‘water scarcity’ levels in December 2021 and [drop to] ‘red level 2’ in December of 2022 and 2023.”