Brazil’s Central Bank Chief Vows to Keep High Interest Rates “For Extended Period”

Gabriel Galípolo, President of Brazil’s Central Bank, declared the need to maintain high interest rates for a prolonged period during Goldman Sachs’ 12th Annual Brazil Macro Conference in São Paulo on Monday.

The Selic rate currently stands at 14.75%, its highest level since 2006, following six consecutive increases totaling 450 basis points since August 2024. “We need to maintain a very restrictive level of interest rates for an extended period,” Galípolo stated firmly.

He emphasized that unanchored inflation expectations and current economic conditions demand caution from monetary authorities. Brazil’s annual inflation reached 5.53% in April 2025, significantly exceeding the Central Bank’s 3% target.

This persistent inflation problem explains the aggressive monetary tightening cycle that began in late 2024. Galípolo stressed that the Central Bank remains far from signaling any downward adjustment to interest rates.

He advised market participants to avoid emotional reactions to economic data, noting that policymakers need time to gain confidence in the data before considering policy changes.

The restrictive monetary policy has already impacted economic growth prospects. Brazil’s GDP growth is expected to slow to 1.6% in 2025 and 1.8% in 2026, down from approximately 3% growth in previous years.

Brazil’s Central Bank Weighs Fiscal Uncertainty

During the conference, Galípolo addressed concerns about fiscal policy potentially offsetting economic slowdown. He described the challenge of setting appropriate interest rates in response to fiscal policies not yet implemented as “a dance that is not easy.”

The Central Bank president has previously explained Brazil’s unique economic structure, noting how the economy maintains dynamism despite interest rates that would cripple other nations.

This phenomenon “has historically demanded larger doses of the remedy to take effect,” according to Galípolo. While some financial institutions had forecast the Selic rate reaching 15% by year-end, recent signals suggest the tightening cycle might conclude earlier.

Morgan Stanley recently reduced its Selic forecast to 14.75% for 2025, down from their previous 15.75% projection. The Central Bank maintains its data-dependent approach with a firm commitment to bringing inflation back to target, regardless of how long high rates must be maintained.

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