Brazil's Central Bank cuts interest rate for third time amid global uncertainty

Brazil's Central Bank has implemented its third consecutive interest rate cut, lowering the benchmark rate by 0.25 percentage points to 14.25% annually. This decision signals the bank's continued commitment to easing monetary policy.

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compatible

The bank's monetary policy committee unanimously decided to continue the relaxation, aiming to align inflation with the target of 3% per year, with a 1.5 percentage point tolerance margin. However, inflation expectations for the close of 2026 have risen to 5.2%, exceeding the target.

In its statement, the Central Bank highlighted a global context marked by "strong increases" in uncertainty, partly due to the "indefinition" surrounding the Iran-US conflict and its impact on oil prices. Domestically, the bank noted improvements in economic indicators during the first quarter.

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strong increase

Looking ahead, the bank indicated that the duration of the current rate-cutting cycle will depend on new information to ensure convergence with the inflation target, emphasizing the need for "serenity and caution." This cautious approach comes as the US Federal Reserve maintained its interest rate but signaled potential future increases due to inflationary pressures.

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indefinition

The rate reduction has been a consistent demand from Brazil's productive sector and the government of President Luiz Inácio Lula da Silva, who faces re-election in October. The high cost of credit has been viewed as a barrier to economic growth, particularly as forecasts point to an economic slowdown this year. Brazil's GDP grew 1.1% in the first quarter, primarily driven by the agricultural sector.

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serenity and caution