Brasília (AFP) – Brazil’s Central Bank on Wednesday held its benchmark interest rate steady at 15 percent, citing “uncertainty” as the United States announced punishing tariffs on the South American economic powerhouse. The bank’s decision came after seven straight hikes that had angered leftist President Luiz Inacio Lula da Silva, who argues high rates stifle growth.
The bank’s Copom monetary policy committee said in a statement it had been “closely monitoring announcements related to the imposition of trade tariffs on Brazil by the United States.” A scenario of “greater uncertainty” had informed a cautious stance, it added. Washington earlier announced tariffs of 50 percent on Brazilian goods, with exemptions on key exports including planes, orange juice and pulp, Brazil nuts, and some iron, steel, and aluminum products.
With the tariffs, US President Donald Trump made good on his threat to wield American economic might to punish Brazil for what he has termed a “witch hunt” against his far-right ally Jair Bolsonaro, on trial for an alleged coup attempt. Unlike the tariffs Trump is slapping on economies around the world, the measures against Brazil have been framed in openly political terms, sweeping aside centuries-old trade ties and a surplus that Brasilia put at $284 million last year.
Brazil’s benchmark interest rate, known as the Selic, remains at its highest level since 2006 and is one of the highest in the world. The bank had raised the rate seven times in succession in a bid to curb inflation. Food inflation, a sensitive issue that has affected the government’s popularity, moderated in June.
© 2024 AFP
