Brazil central bank hikes rates to near 20-year high, leaves next steps open
BRASILIA (Reuters) -Brazil's central bank raised interest rates by 50 basis points on Wednesday in a sixth straight hike that pushed borrowing costs to their highest in nearly 20 years, and left future steps open amid global uncertainties and sticky domestic inflation.
The bank's monetary policy committee, known as Copom, raised the Selic to 14.75% in a unanimous decision, matching forecasts from 32 of 35 economists in a Reuters poll.
"For the next meeting, the scenario of heightened uncertainty, combined with the advanced stage of the current monetary policy cycle and its cumulative impacts yet to be observed, requires additional caution in the monetary policy action and flexibility to incorporate data that impact the inflation outlook," policymakers said in the statement from the decision.
In March, the central bank had already flagged the need for further tightening, though at a slower pace than the previous three 100 basis-point hikes.
With Wednesday's move - announced just hours after the U.S. Federal Reserve held rates steady but cited the risk of rising inflation and unemployment - the Selic benchmark rate has now reached its highest level since August 2006.
The sky-high rates come against a backdrop of a 5.49% annual inflation rate, well above the official 3% goal, with markets skeptical that inflation will return to target even by as far out as 2028.
The aggressive tightening has added 425 basis points to the benchmark rate since September, but policymakers stressed on Wednesday they observe "an incipient moderation in growth," with indicators of domestic economic activity and the labor market still exhibiting strength.
Global uncertainties, triggered by sweeping U.S. trade tariffs that have clouded the outlook for the world's largest economy, have led Copom members to emphasize the need for greater caution and flexibility in remarks ahead of the decision.
The current environment, they argued, not only limits their ability to provide any guidance but also requires policymakers to consider a broader and diverse set of data to assess whether monetary policy is achieving its intended effects.
Their concern about the trajectory of Latin America's largest economy came despite some favorable inflationary developments since the Brazilian central bank's latest policy meeting, including a stronger currency and lower commodity prices.
On the other hand, the government of President Luiz Inacio Lula da Silva has unveiled new stimulus measures, such as changes to rules governing payroll-deductible loans, as it struggles to reverse a plunge in the leftist leader's approval ratings.
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Dance poles and leopard-print walls: Love motels ready rooms for climate summit
'We're taking out anything too erotic from the rooms,' said Yorann Costa, 30, the owner of Motel Secreto, Portuguese for 'Secret Motel.' 'And the location is perfect.' The 12-day summit, the first global climate gathering to be held in the Amazon region, has set off a rush to prepare Belém, a port city of 1.3 million, for tens of thousands of visitors. To meet the demand for hotel rooms, officials vowed to nearly triple the city's stock, from 18,000 beds in 2023 to 50,000 for the event. Advertisement As the summit nears though, uncertainty over whether there will be enough lodging has pushed hotel rates above $1,000 a night and threatened to cause a diplomatic crisis, with some delegations complaining that eye-watering prices may bar poorer nations -- often grappling with the worst impacts of climate change -- from attending. Advertisement Seeking to calm jitters, Brazil said this month it had struck a deal with two cruise ships to provide some 6,000 additional beds, which will first be offered to developing and island nations at discounted rates of up to $220 per night. New hotels are also being built and old ones refurbished. Schools are being fitted with beds. Sporting clubs are being transformed into dormitories and residents are rushing to revamp homes into rentals. Still, with less than four months to go, much of the new lodging is still not complete and the city is thousands of beds short of its target. Against this backdrop, Belém's numerous love motels -- short-term accommodations that charge by the hour and often lack a reception area or amenities like gyms and pools -- are preparing to fill the gap, already tweaking and outfitting many of their 2,500 rooms for visitors attending the climate summit. 'It's the time to join forces,' said André Godinho, who represents Belém in the planning of COP30. 'The possibility of a love motel as accommodation -- it's not ugly, it's not wrong. It's part of the solution.' Love motels surged during Brazil's repressive dictatorship in the 1960s, when homes were often being surveilled. They have since become ubiquitous across the country, Latin America's largest nation, where young people often live at home well into adulthood. Inspired by American roadside lodging that charges by the hour, the Brazilian love motel quickly gained popularity by offering short-term stays for a bargain and adopting a romantic aesthetic similar to Japan's love hotels. (BEGIN OPTIONAL TRIM.) This is not the first time an emergency has forced Brazil's love motels to adapt to a different clientele. Facing hotel shortages ahead of the World Cup in 2014 and the 2016 Rio Olympics, thousands of motels were similarly revamped to welcome visitors. Advertisement This time around though, the country's love motels are preparing to welcome a different kind of guest, arriving for business rather than pleasure. (END OPTIONAL TRIM.) On a recent afternoon in Belém, efforts to refresh the city's motels and make them a touch less sexy were on full display. At Fit Motel, circular beds, a classic feature of many rooms, leaned on walls, cast aside to make space for more conventional rectangular mattresses. A few miles down the road, at Love Lomas motel, fresh coats of paint were drying and new sheets lined the beds. In the premium suite, the flashing red, green and blue lighting would remain, but guests could ask for the erotic chair -- a metal-and-leather contraption resembling a dentist's chair that was bolted to the floor for safety -- to be removed. 'People think it's like a brothel,' said Ricardo Teixeira, 49, who manages both motels and is trying to buff up their reputation. 'But it's just a space like any other.' He is not sure yet if he will swap the menus in the rooms, which offer beers and burgers, as well as sex toy rentals. (BEGIN OPTIONAL TRIM.) At the Pousada Acrópole (Portuguese for 'Acropolis'), the word 'motel' was swapped out for 'inn' and the red facade was painted a muted gray, though the plaster bas-relief of a mythological romance -- a chiseled Greek hero and a nude Aphrodite holding a red apple -- still flanks the entrance. 'This is a big opportunity for us,' said Alberto Antonio Braga da Silva, 55, the owner. Motel guests normally pick up room keys from a parking lot attendant, but he plans to add a makeshift reception for the summit. 'And in there,' Silva said, pointing to the second story, 'I'm going to have one of those -- what are they called? Coworking.' Advertisement (END OPTIONAL TRIM.) Back at Motel Secreto, Costa prepared one suite by adding bunk beds and taking down an oversized framed picture of a person's rear end that hung on the wall. But he stopped short at getting rid of the dance pole, the leopard-print wallpaper and the red, heart-shaped hot tub. 'I have to think about what comes after COP30,' Costa said. 'I can't just spend a ton of money and tear everything out.' As we stepped out of a suite into the dark hallway connecting the rooms, Costa whispered apologetically over the sound of loud moans. 'This might be a bit awkward,' he said, waving to the red lights flashing above a handful of rooms, signaling that they were occupied. 'There's lovemaking going on.' Those lights, he says, will also stay in place. So far, most motels have struggled to convince summit attendees to give them a chance. Delegations from at least half a dozen countries have inquired about booking motels during the summit, according to owners and real estate brokers, but few have reserved rooms yet. Even with few options, many visitors heading to Belém for the summit remain hesitant about the racy decorations, said Giselle Robledo, a property broker working with delegations seeking accommodations. 'The embassies are really conservative,' she said. 'They don't want to go to a love motel.' Advertisement And then there is the cost issue. Even as Brazilian officials have warned property owners to rein in prices, many motels are still asking guests to pay hundreds of dollars per night to stay in these redecorated rooms. 'The prices have been absurd, they need to come back to reality,' Robledo said. Lovers who frequent Belém's motels typically pay from $10 to $35 for the first hour, while an overnight stay in a premium suite costs more than $150. But, during the summit, some motel owners hope to charge from $300 to $650 per night. 'The market is setting these prices,' said Teixeira, who is also the regional director of the Brazilian association of love motels. 'And it's still a better deal than a hotel.' (STORY CAN END HERE. OPTIONAL MATERIAL FOLLOWS.) At a less romantic three-star hotel across the road from the conference center where the talks will be held, rooms are going for $1,250 per night, according to booking sites. 'The demand is wild,' said Jeimison Louseiro, the hotel manager, whose landlord recently asked him to vacate his nearby apartment, so that it could be rented out to summit attendees. Costa, for one, has no doubt that visitors will change their minds and pack his motel by the time the climate summit starts. In the end, he said, lodging is going to be very tight. 'Unfortunately, there won't be a room for everyone,' he said. 'And what we're offering is an option.' This article originally appeared in
