The Central Bank of Brazil emphasized the importance of indicating a continued cycle of interest rate increases in light of rising inflation, according to the minutes from its March policy meeting. Policymakers highlighted that high local food prices could lead to increased costs across other sectors, with services inflation on the rise. At the meeting, the benchmark Selic rate was raised by a full percentage point to 14.25%, with a hint of a smaller increase in the future.

Due to the time lag in monetary policy effects, the Committee saw it fitting to communicate that the next rate adjustment would be smaller and only disclosed the direction of the change due to heightened uncertainty. In response to persistent inflation pressures, the central bank has raised interest rates by 3.75 percentage points since September. The country's cost of living has been affected by factors such as extreme weather and currency fluctuations.

February saw a significant 1.31% increase in consumer prices, driven by housing, education, and food and beverage costs, leading to an annual inflation rate of 5.06%, surpassing the 3% target. Policymakers expressed concerns about uncontrolled inflation expectations, projecting inflation above the target for several months.

President Luiz Inacio Lula da Silva's popularity has been affected by inflation, prompting the government to implement measures to stimulate consumption, which may inadvertently contribute to price pressures. Initiatives include expanding loan options for private sector employees, easing rules for severance fund withdrawals, and proposing income tax exemptions for lower-wage workers from 2026.