FX.co ★ Brazil Holds Interest Rate 15%, As Expected

In November, Brazil's central bank decided to keep its key interest rate steady at 15%. This decision aims to guide inflation towards the target amidst ongoing uncertainties. International factors, such as the economic climate in the U.S. and global financial market volatility, continue to impact emerging markets. Domestically, while economic growth is slowing, the labor market persists in showing robustness, and inflation remains above the desired level. Inflation projections for 2025 and 2026 stand at 4.5% and 4.2% respectively, with the central bank's committee, Copom, forecasting inflation of 3.3% by the second quarter of 2027. The bank pointed out potential risks: the persistence of high services inflation and a potential weakening in the currency could drive inflation higher, while a sharper domestic slowdown or a drop in commodity prices could present downside risks. The Copom stressed that future policy adjustments might be needed to uphold price stability. This decision mirrors a careful strategy, balancing inflation control with fostering economic growth.