Brazil's economic activity exceeds expectations ahead of interest rate decision

BRASILIA, June 16 (Reuters) - Brazil's economic activity grew more than expected in April, according to central bank data released on Monday, reinforcing signs of resilience despite elevated borrowing costs ahead of the central bank's key interest rate decision this week.

The IBC-Br index, a leading indicator of the country's gross domestic product (GDP), rose by a seasonally adjusted 0.2% in April compared to the previous month.

This reading outpaced the 0.1% growth forecast in a Reuters poll of economists.

The services sector, which drives Latin America's largest economy, was a key contributor, with a 0.4% increase in its IBC-Br reading.

The tax revenue component rose 0.6% on a month-over-month basis. However, the agricultural and industrial readings posted declines of 0.9% and 1.1%, respectively.

On a year-over-year basis, the IBC-Br index grew 4.0%, underscoring the economy's momentum.

The stronger-than-expected economic activity has fueled speculation the central bank may consider another interest rate hike at a policy meeting that ends on Wednesday.

Still, the median forecast in a central bank weekly survey released earlier on Monday anticipates the benchmark Selic rate will remain unchanged at 14.75%, its highest level in nearly two decades.

Such a decision would mark the end of the aggressive tightening cycle initiated in September 2024 to rein in inflation, which has consistently exceeded the central bank's official target of 3% plus or minus 1.5 percentage points.