Brazil’s central bank holds interest rate steady following Lula’s re-election

Brazil’s Central Bank on Wednesday held its benchmark interest rate steady, following the re-election of leftist President Luiz Inacio Lula da Silva, breaking a long cycle of rate cuts.

Lula, who unexpectedly defeated right-winger Flavio Bolsonaro in a presidential runoff on Oct 25, has pledged more social measures during his fourth term, with critics doubtful about his ability to maintain fiscal balance.

The Sao Paulo Stock Exchange has posted sharp losses since his victory, while the Brazilian currency, the real, has depreciated against the US dollar.

On Wednesday, the Central Bank’s Monetary Policy Committee left the Selic rate unchanged at 13.75%, one of the highest in the world.

The move ended a cycle of five consecutive cuts that began in March.

“The Committee continues to monitor how developments of domestic fiscal policy impact monetary policy and financial assets, reinforcing its cautious stance in a scenario of heightened uncertainty,” it stated.

In recent years, Lula has pushed for a lower benchmark rate as a way to stimulate Latin America’s largest economy.

The leftist leader is concluding his third non-consecutive term with record employment rates and inflation under control, although a loss of purchasing power remains a concern for many Brazilians.