BRASILIA, Dec 9, 2021 (BSS/AFP) - Brazil's central bank on Wednesday hiked
its benchmark interest rate by a whopping 150 basis points for the second
straight time, seeking to fight surging inflation even as Latin America's
biggest economy is stuck in recession.

   The increase, the seventh straight, was in line with analysts'
expectations. It brought the Selic rate to 9.25 percent, the highest since
mid-2017.

   The decision was made unanimously by the nine members of the bank's
monetary policy committee, which said in a statement it expected "another
adjustment of the same magnitude" when it ends its next meeting, on February
2.

   "It is appropriate for the monetary tightening cycle to advance
significantly into the territory of a contraction," it said.

   "The committee will persevere in its strategy until not only the process
of disinflation but the anchoring of (inflation) expectations in line with
its targets are consolidated."

   Policymakers are navigating treacherous waters as they try to right
Brazil's listing pandemic recovery.

   The South American giant's economy is in recession, having contracted by
0.4 percent in the second quarter of 2021 and 0.1 percent in the third.

   Despite the slump, the central bank has hawkishly slammed on the monetary
policy brakes because of surging inflation, fueled by both global price
pressures and Brazil's own domestic problems.

   The annual inflation rate came in at 10.67 percent in October, nearly
triple the bank's target of 3.75 percent.

   - Spending amendment -

   Rapidly rising prices have been driven by a series of factors:
internationally, those include global supply chain shortages, increasing oil
prices and pandemic uncertainty.

   At home, Brazil faces electricity rate hikes caused by droughts that
sapped crucial hydroelectric dams, a weak currency and uncertainty around
President Jair Bolsonaro's bid to amend the constitution to free up money in
the government's tight budget for massive social spending.

   Critics accuse the far-right president of embracing economic populism with
the new spending measures.

   But he won a victory Wednesday when Congress adopted a first portion of
the spending amendment, enabling the government to postpone court-ordered
debt payments.

   That will free up 62 billion reais ($11 billion) to spend in 2022, with
most expected to go to welfare payments.

   The economy has turned into a major headache for Bolsonaro heading into
elections next October that polls currently place him on track to lose to
leftist ex-president Luiz Inacio Lula da Silva.

   Double-digit inflation has left many Brazilian families struggling to make
ends meet, weighing down Bolsonaro's already sagging popularity -- and
driving his bid for new social spending, political analysts say.

   Brazil's unemployment rate has meanwhile been stubbornly high, at 12.6
percent for the third quarter.