High Rates To Cool Growth

High Rates To Cool Growth by Ashly Chole last updated on April 12, 2025

Higher Rates To Cool Growth In Brazil

According to the Central Bank of Brazil, higher rates will slow down the growth rate in the country. As a result, the inflation, which is currently above-target, will also come down.

The governor of Brazil's central bank added that they have given the medicine. Now, they are waiting for it to show its effect over time.

High Interest Rate In Brazil

Since September 2024, the central bank has hiked the rate by 3.75%, which is a big number. Now, the central bank is patiently waiting to see the results in the economic indicators.

According to experts, the central bank will face challenges from sticky inflation and consumer demand in the country. As of now, the interest rate is hovering at 14.25%, which is a very high level.

Earlier, the central bank had forecasted a 2.1% GDP growth in 2025. Now, they have lowered it to just 1.9% during the year.

One analyst added that the central bank will likely rely on a large set of data to establish confidence. The only time the rates will go down is when sticky inflation is tamed.

Swap rate contracts, which are set to expire in January 2026, show a reduction of 12 bps. This is a sign of the market players reacting to the message of the central bank.

One analyst commented on how the inflation reading was a lot better than the forecast. However, it also shows an acceleration in the inflation level.

Food prices are rising as a result of a string of unfavorable weather patterns and lavish government expenditures, which are upsetting consumers and making Galipolo's job even more difficult.

Although policymakers are being thwarted by rising inflation expectations and uneven activity, they are anticipated to pause their tightening cycle at some point this year.

If we look back, central banks have always used the policy rate as a tool to counter the inflation levels.