Central Bank of Brazil adjusts anticipated GDP growth rate for 2025 downwards to 2.1%
The Central Bank of Brazil has recently revised its 2025 GDP growth projection, bumping it up to 2.1%. This growth spike comes with the prediction that inflation will continue to take a nosedive, according to the bank's Q2 Monetary Policy Report.
But now, the bank's crystal ball hints at an economic slowdown for the rest of the year, as economic activity indicators suggest. Between January and March this year, the nation witnessed a 1.4% GDP surge, largely due to the agricultural sector. Simultaneously, unemployment has seen a drop, with more jobs becoming available.
Inflation-wise, the annual rate was 5.1% in February and jumped to 5.3% in May, meandering slightly off the bank's forecasts. Economists estimate that this indicator will wrap up at 3.6% in 2025, hovering above the bank's target of 3% until the end of 2027.
Looking ahead, inflation reduction in Brazil could be achievable by experiments like a sharper economic slowdown at home, global uncertainty curbing economic activities, and a decrease in the cost of raw materials. The bank is adamant about keeping the interest rate, or Selic rate, unchanged at 15%, stating that controlling inflation is a must for the nation to flourish, create jobs, and safeguard the buying power of Brazilians.
The Monetary Policy Committee has undertaken a persistent cycle of interest rate hikes in recent months, shooting them up to their highest level since 2006. When it comes to cutting them, the committee expects to pause and assess if the interest rate level will be enough to move inflation to its target of 3%.
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The Central Bank of Brazil anticipates an economic slowdown for the remainder of the year, considering the business activity indicators. To achieve inflation reduction, the bank is exploring options such as a deliberate economic slowdown, global uncertainty reducing economic activities, and a decrease in the cost of raw materials in the finance sector.
