Brazil central bank kept its key interest rate unchanged for the third straight meeting on Wednesday and hinted at tightening further if inflation fails to slow as expected.
The monetary policy committee, known as Copom, decided to hold the Selic rate at 13.75 percent. This was the highest rate since late 2016.
The bank had raised its key rate from a record low 2.00 percent in March 2021 to its current level.
The Committee underscored that future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected.
Policymakers observed upside risks to inflation from the country’s future fiscal framework and additional fiscal stimuli that underpins demand. President-elect Luiz Inacio Lula da Silva is set to take office on January 1.
“The Committee will closely monitor future developments in fiscal policy and, in particular, its effects on asset prices and inflation expectations, with potential impacts on the dynamics of future inflation,” the bank said in the statement.