2021.05.0605:51:00UTC+00Brazil Central Bank Hikes Key Rate By 75 Bps

Brazil's central bank raised its key interest rate by 75 basis points and signaled another rate hike of the same magnitude at its next meeting.

The monetary policy committee, known as Copom, unanimously decided to increase the Selic rate to 3.50 percent from 2.75 percent.

"For the next meeting the Committee foresees the continuation of the partial normalization process with another adjustment of the same magnitude in the degree of monetary stimulus," the bank said in a statement.

The committee observed that the transition to higher energy prices should keep inflation under pressure in the short run. The Committee maintains the diagnosis that the current shocks are temporary, but continues to closely monitor its evolution.

Despite the second wave of the pandemic, recent indicators on economic activity are evolving better than expected, the bank said. Prospectively, uncertainty about economic growth still remains larger than usual.