Brasília: Brazil’s central bank on Wednesday hiked its key interest rate one point to 14.25 percent, a nine-year high, as it seeks to contain inflation in Latin America’s largest economy.

It was the fifth consecutive increase, and counter to leftist President Luiz Inacio Lula da Silva’s calls for a lower rate to boost economic growth.

The bank’s Monetary Policy Committee cited a “challenging external environment” for its decision, as well as persistent inflation domestically and signs of an “incipient moderation in growth.”

The committee forecast another rate hike, of a “smaller magnitude,“ from its next meeting in May, if current conditions persist.

The rate was last this high between July 2015 and October 2016, when Brazil was in the grips of an economic recession.

Lula, battling low approval ratings, argues that high lending rates hinder growth by making credit more expensive for consumers and investors.

Central banks use rate increases to curb inflation by reducing consumer and business spending and lowering demand.

Last month, the price for goods and services in Brazil was 5.0 percent higher year-on-year, hitting 5.0 percent for the first time since September 2023 — outside the government’s targeted upper threshold.

The figure could close the year at 5.66 percent, according to experts consulted by the central bank.

Persistent food inflation prompted the government this month to eliminate import tariffs on basic products such as meat, coffee, sugar, oil and corn.

Despite Lula’s economic headaches, Brazil recorded a low unemployment rate of 6.5 percent between November and January, and growth of 3.4 percent in 2024 – its best performance since 2021.