Brazil’s central bank keeps interest rate unchanged at 10.50%

ISTANBUL

Brazil’s central bank announced late Wednesday that it kept its benchmark interest rate unchanged at 10.50%.

"The global environment remains adverse because of the uncertainty about the effects and extension of the easing cycle in the United States and the dynamics of activity and inflation in many countries," the bank’s Monetary Policy Committee (Copom) said in a statement.

"The central banks of major economies remain committed to bringing inflation back to its targets in a context characterized by labor market pressures," it added. "The Committee judges that the external environment, also marked by less synchrony in monetary policy cycles across countries, continues to require caution from emerging market economies."

Brazil's consumer inflation annually increased 4.23% in June, gaining pace from a 3.93% year-on-year gain recorded in May, according to the Brazilian Institute of Geography and Statistics (IBGE).

On a monthly basis, however, the consumer price index increased 0.21% in June, slowing down from a 0.46% month-on-month gain recorded in May, IBGE figures showed.

The producer price index increased 1.28% in June, rising for the fifth consecutive month, accelerating from a monthly gain of 0.36% in May.

Banco Central do Brasil last lowered its benchmark interest rate on May 8 by 25 basis points to 10.50%, down from 10.75%.

The bank had 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.

Copom said its inflation projections for the first quarter of 2026 stand at 3.4% in its reference scenario.

Inflation expectations for 2024 and 2025, based on its focus survey, are around 4.1% and 4%, respectively, it added.