Brazil central bank cuts Selic rate to 13.75%

Brazil's central bank cut its benchmark Selic interest rate from 14% to 13.75% on Wednesday, its fifth reduction in a row, as President Luiz Inacio Lula da Silva seeks re-election in October.

The cut was part of a cycle that began in March after almost two years of rate increases. The decision had been widely expected.

The bank warned that “higher than usual” inflation risks remain, even though inflation has fallen within its target of 3%, plus or minus 1.5 percentage points.

The decision came hours after the US Federal Reserve raised interest rates by 25 basis points to between 3.75% and 4.00%, its first increase since 2023.

Lula, who is seeking a non-consecutive fourth term in elections starting October 4, has long argued for lower interest rates to support economic growth. Higher rates make borrowing more expensive and can reduce consumption, while also helping to contain inflation.

AFP reported that Lula is neck-and-neck in election polls with conservative senator Flavio Bolsonaro, the son of jailed former far-right president Jair Bolsonaro, whom Lula defeated in 2022.

Food prices remain a campaign issue. AFP reported that the price of picanha, a popular steak in Brazil and a symbol used by Lula's critics, has risen by around 10% since Lula promised during the 2022 campaign to put it back on people's plates.