Two weeks to Brazilian presidential election, Central Bank cuts interest rate for the fifth time running
With presidential elections in two weeks’ time, Brazil’s central bank cut its benchmark interest rate for the fifth straight time. The bank lowered the so-called Selic rate from 14% to 13.75%, and is part of a cycle that began in March after almost two years of rate hikes.
Brazil's central bank has slashed its benchmark interest rate for the fifth consecutive time in the run-up to presidential elections scheduled for October 4. The Selic rate was reduced from 14% to 13.75%. This move follows a series of hikes over nearly two years. President Luiz Inacio Lula da Silva is seeking a fourth non-consecutive term in office.
The previous Central Bank head, Roberto Campos Neto, was replaced by Gabriel Galipolo following criticism from U.S. President Joe Biden. Lula has been regularly criticized by his U.S. counterpart for raising interest rates, which can make borrowing more expensive and curb consumption but also help control inflation. Brazil is currently facing an inflation threat, which Campos Neto aggressively battled.
However, under Galipolo, the central bank has taken a more cautious approach, considering the recent surge in oil prices due to the U.S.-Israel conflict with Iran and the unpredictable monetary policies of other major economies. Despite this, the Monetary Policy Committee (Copom) meeting warned that "higher than usual" risks to inflation persist, even though the current rate has dropped into the bank's target range of 3% plus or minus 1.5 points.
Lula's approval rating is virtually tied with conservative senator Flavio Bolsonaro, son of jailed former right-wing president Jair Bolsonaro, whom Lula defeated in 2022. Despite the easing inflation, many Brazilians feel life has become more expensive. The preliminary price index for May shows a 1.73% rise in food consumed at home, particularly potatoes, which saw a 26.3% increase. This rise was attributed to factors such as excessive rainfall in producing regions of Minas Gerais and Paraná.
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- Central Bank cuts Brazil’s benchmark interest rate to 13.75% per year agenciabrasil.ebc.com.br
