Brasília (AFP) - Brazil's central bank raised its key interest rate for the ninth straight time Wednesday, as Latin America's biggest economy continues to reel from surging inflation, now exacerbated by the Ukraine war.
The bank's monetary policy committee raised the benchmark Selic rate by one percentage point, to 11.75 percent, in line with analysts' forecasts, citing inflation that "continued to negatively surprise" policy makers.
Brazil has waged one of the most aggressive interest-rate tightening cycles in the world as it struggles with spiraling prices driven upward by the fallout of the coronavirus pandemic and now Russia's invasion of Ukraine.
The latest increase dialed back the pace of monetary tightening a notch -- the previous three Selic increases had been by 1.5 percentage points each.
But the committee "considers that, given its forecasts on the risk of inflation expectations remaining above target for a longer term, it is appropriate for the cycle of monetary tightening to continue advancing significantly into even more contractionary territory," it said in a statement.
The decision was unanimous by the committee's nine members.It said it expected another hike "of the same magnitude" at its next rate-setting meeting, scheduled for May 3 and 4.
Brazil's annual inflation rate stands at 10.54 percent, far above the central bank's target of 3.5 percent.
The economy exited recession in the fourth quarter of 2021, but remains sluggish -- and has emerged as a crucial weak spot for President Jair Bolsonaro as he gears up to seek reelection in October.
The move came the same day the US Federal Reserve raised its benchmark rate a quarter-point, its first increase since December 2018.
Ukraine crisis 'substantial' hit
Brazil's central bank warned the international outlook had "substantially deteriorated" because of the Ukraine crisis.
The specter of inflation is spooking policy makers worldwide.
In Brazil, the problem looks set to get worse before it gets better.
Adding to price pressures, state-run oil company Petrobras hiked gasoline prices by 19 percent and diesel by 25 percent last week, citing the impact of the Ukraine crisis on oil markets.
The central bank started its tightening cycle a year ago, rapidly raising the key rate from an all-time low of two percent introduced to spur the economy's pandemic recovery.
The massive hikes have yet to substantially bring down inflation.
Meanwhile, they are putting the brakes on economic growth.The economy is forecast to expand just 0.49 percent this year, according to analysts polled by the central bank.
It recovered from recession to post growth of 4.6 percent last year, catching up from a painful 3.9-percent contraction in pandemic-battered 2020.
Soaring prices and sluggish growth are hurting Brazilians' wallets and Bolsonaro's popularity as the far-right president fights an uphill battle to win reelection in seven months' time.
His likely opponent, leftist ex-president Luiz Inacio Lula da Silva, currently leads Bolsonaro by 44 percent to 26 percent, according to a poll published Wednesday by Genial Investimentos and Quaest.
