BRASILIA, Dec. 11 (Xinhua) -- The Monetary Policy Committee (Copom) of Brazil's central bank decided on Wednesday to increase the benchmark Selic interest rate from 11.25 percent to 12.25 percent, the second-highest since November 2023, when it stood at 12.75 percent.

In response to an adverse economic scenario complicating the convergence of inflation toward the target, additional adjustments of the same magnitude are expected in the next two meetings, potentially raising the Selic rate to 14.25 percent annually, according to Copom's statement.

"The total magnitude of the monetary tightening cycle will be determined by the firm commitment to inflation convergence toward the target and will depend on the evolution of inflation dynamics, particularly the components most sensitive to economic activity and monetary policy," the statement said.

The interest rate increase aims to curb inflationary pressures, as the Consumer Price Index may exceed the upper limit of the official target range, set at 3 percent with a tolerance of 1.5 percentage points. Analysts project inflation at 4.84 percent for this year.

This decision marks the largest Selic rate hike under the administration of Luiz Inacio Lula da Silva and the most significant increase since February 2022, when a 1.5-percentage-point hike was implemented. All nine Copom members voted unanimously for the adjustment.

Wednesday's meeting was the last led by Roberto Campos Neto, who will step down as central bank president in January 2025. He will be succeeded by Gabriel Galipolo, the current director of monetary policy at the Central Bank, who was appointed by Lula and approved by the Senate in October. Enditem

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