Brazil's central bank monetary policy director, Nilton David, announced on Monday that the central bank is set to implement a 100 basis-point interest rate hike, as previously communicated. During his inaugural public address in this position, David emphasized the need for increased confidence in monetary tightening due to heightened uncertainties in the global geopolitical landscape.
At an event hosted by the American Chamber of Commerce, David reiterated the central bank's commitment to addressing risks to achieve its 3% inflation target. He pointed out that consumer prices in Brazil increased by 4.56% in the twelve months leading up to January, with projections indicating a rise to 5.2% this year.
David emphasized, "We raised rates by 100 basis points, and our plan is to maintain this trajectory to account for uncertainties and ensure a robust safety margin, as indicated by our forward guidance." In response to strong economic activity and currency devaluation, policymakers initiated a 100 basis-point rate hike in December, with plans for two additional increases of the same magnitude. However, recent economic indicators hint at a slowdown, coupled with an 8% appreciation of the Brazilian real against the U.S. dollar year-to-date, leading to a shift in market expectations from previous projections of rates exceeding 16% by the end of 2025.
According to a recent central bank survey, economists predict interest rates to peak at 15.25% in June before gradually decreasing to 15% by the year's end.