FX.co ★ Brazil Raises Rate by 50 bps

In May 2025, the Central Bank of Brazil increased its Selic rate by 50 basis points, bringing it to 14.75%. This move is part of a strategy to align inflation more closely with the target rate. Beyond prioritizing price stability, the adjustment aims to mitigate economic volatility and promote full employment. While economic activity and labor market indicators continue to exhibit strength, growth is showing signs of slowing, and both headline and core inflation remain above desired levels. According to the Focus survey, inflation expectations for 2025 and 2026 are projected at 5.5% and 4.5%, which are higher than intended. Meanwhile, the Central Bank's inflation forecast for 2026, based on their reference scenario, is pegged at 3.6%. The Committee has expressed caution and is prepared to modify its policy in response to changing conditions. The external economic environment continues to be challenging and notably uncertain, largely influenced by U.S. trade policy, which is exacerbating fears about the extent of the global economic slowdown and its varied effects on inflation and the shaping of monetary policy.