Brasília (AFP) – Brazil’s Central Bank on Wednesday announced a second consecutive cut to its benchmark interest rate, one of the world’s highest, in a boost for left-wing President Luiz Inacio Lula da Silva as he courts a fourth term. The bank lowered the key rate, known as the Selic, to 14.50 from 14.75 percent. Lula, who is seeking a fourth term in October elections, has persistently railed against high interest rates, arguing that they stifle growth.
Despite cutting the Selic, the Central Bank said the uncertainty generated by the conflicts in the Middle East created “higher than usual” inflationary risks. “In the current scenario characterized by a strong increase in uncertainty, the Copom (the bank’s economic policy committee) reaffirms serenity and caution in the conduct of monetary policy,” it said. Global oil prices surged after the United States and Israel went to war with Iran in late February.
Lula has implemented measures to cushion the impact on Brazil’s economy, notably suspending taxes on diesel, which truckers rely on to get goods to market. Inflation nonetheless accelerated to 4.14 percent in March, driven by the fuel price hikes.
But Latin America’s biggest economy is growing and unemployment is at historic lows. Brazil, a net crude exporter according to the IEA, is relatively more insulated to external petroleum price shocks compared to countries that rely on imports.
© 2024 AFP
