Brazil’s central bank raised its key interest rate by 0.5 percentage points to 11.25% on Wednesday, marking the second consecutive increase.

This move contrasts with the U.S. and EU, where central banks have started cutting rates.

Brazil’s inflation in September was 4.42%, above the 3% target, driven by factors like a drought affecting food and electricity prices.

The market predicts inflation will be 4.59% in 2024.

Other contributing factors include a high U.S. dollar, a tight labor market, and government budget policies.

Despite economic growth of 3.3% in Q2 and a drop in unemployment, President Lula has criticized rate hikes for stifling growth, Barron’s has reported.

The central bank’s next meeting is in December.

Written by B.C. Begley