Brazil`s central bank on Wednesday raised its key interest rate by 50 basis points to 11.75 percent, surprising many analysts who had expected a rise of just a quarter percentage point.
The rise came on the back of a one quarter point rise just over a month ago which was the first since April and in the wake of leftist Dilma Rousseff`s re-election as president, who last week appointed a new finance team to tackle rising inflation.
The government kept the main Selic rate on hold at 11 percent for much of the year from April but had to make adjustments after inflation moved just above a government target ceiling of 6.5 percent. The government official target is 4.5 percent.
Industry, meanwhile, wants lower rates to kickstart a recovery with Brazil in recession and suffering a fourth straight year of low growth with GDP set to grow barely above zero this year.
Prior to Wednesday`s decision, analyst Andre Ferreira of Futura was one market observer who did forecast a half-point increase, "given inflation is very high."
He added he believed 2015 would see further rises of a total 1.25 points.
Central bank chairman Alexandre Tombini warned last week that Brazil must "maintain especially vigilant" monetary policy to keep inflation in check and the eight-strong board reiterated as much following their decision.
