Brazil Raises Benchmark Interest Rate to 10.75%... Double Digits for the First Time in 5 Years

Photo by EPA Yonhap News

[Asia Economy Reporter Park Byung-hee] Brazil's benchmark interest rate has risen to double digits for the first time in nearly five years.

Bloomberg reported on the 2nd (local time) that the Central Bank of Brazil raised the benchmark interest rate by 1.5 percentage points from 9.25% to 10.75% at its monetary policy meeting.

The Central Bank of Brazil has raised the benchmark interest rate eight consecutive times, starting from March last year when it increased from 2.00% to 2.75%. It is the first time since May 2017, nearly five years ago, that Brazil's benchmark interest rate has reached double digits.

With inflationary pressures continuing, the central bank is expected to maintain its policy of raising the benchmark interest rate for the time being.

Last year's inflation rate was recorded at 10.06%, the highest since 2015 (10.67%). It was also the first double-digit inflation rate in six years.

Although inflation is expected to ease compared to last year, it is still projected to exceed the government's suppression target, recording around at least 5%.

Brazil's economy has already fallen into a technical recession, which is expected to increase the central bank's concerns. Brazil's Gross Domestic Product (GDP) shrank by 0.4% quarter-on-quarter in the second quarter of last year and decreased by 0.1% in the third quarter. Generally, if GDP declines for two consecutive quarters, it is considered to be in a recession.

There are also forecasts that Brazil's economic growth rate this year will be the worst since the introduction of the Real Plan in 1994, which introduced the Real as the new currency based on a fixed exchange rate system pegging the US dollar and the Real at a 1:1 ratio.

This content was produced with the assistance of AI translation services.