Brazil Cuts Rates Again Despite Rising Inflation

Brazil’s central bank cut its benchmark rate by 25 basis points to 14.25% at its June meeting, in line with market expectations and marking a third straight quarter-point rate cut. Policymakers said the decision was taken amid heightened uncertainty and aims to support economic activity without compromising their commitment to price stability. The central bank highlighted persistent inflationary pressures despite easing energy costs following the interim Iran-US peace agreement. Annual inflation accelerated to 4.72% in May, remaining above the target range, while inflation expectations for 2026 and 2027 stayed elevated at 5.3% and 4.1%, respectively. At the same time, domestic economic activity remained resilient, supported by a strong labor market, with GDP expanding 1.1% in the first quarter and the central bank’s activity index rising 0.51% in April. The Copom emphasized that risks to inflation remain elevated and that future policy decisions will depend on incoming economic data.
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