(Bloomberg) -- Brazil’s central bank raised its interest rate by 100 basis points and pledged a hike of the same magnitude for its next meeting, slowing the pace of one of the world’s most aggressive tightening cycles to gauge the inflationary impact from higher oil prices.

Policy makers on Wednesday lifted the benchmark Selic to 11.75%, as forecast by 38 of 44 economists in a Bloomberg survey and in line with prior central bank guidance for a smaller hike. The other analysts either expected a fourth increase of 150 basis points or a still large 125 basis-point boost. The bank has now raised rates by 975 basis points over the past 12 months. 

“The moment requires serenity to assess the size and duration of the current shocks,” policy makers wrote in a statement accompanying their decision. “If those shocks prove to be more persistent or larger than anticipated, the Committee will be ready to adjust the size of the monetary tightening cycle.

Policy makers led by Roberto Campos Neto are hamstrung by inflation above 10% and tepid growth in Latin America’s largest economy. With commodities already surging worldwide, state-controlled oil company Petroleo Brasileiro SA raised the cost of diesel by as much as 25% last week, propelling consumer price expectations through 2024 further above target. Gross domestic product is seen expanding just 0.5% this year due in part to tighter monetary conditions.

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“This is still a considerable hike,” Mirella Hirakawa, an economist from local asset manager AZ Quest, said before the decision. In the past few weeks oil has swung from around $130 a barrel to near $100. “Central bankers need time to understand the magnitude of this shock.” 

Brazil’s decision came hours after the U.S. Federal Reserve raised interest rates by a quarter percentage point. Regionally, central banks from Mexico to Chile are expected to continue tightening monetary policy later this month.

Annual inflation in Brazil shot past expectations in February and, at 10.54%, stands close to last year’s peak. Increases were widespread, as adverse weather conditions push up food prices and manufactures face supply shortages. 

Most economists see cost of living increase slowing down to 6.45% by December and 3.70% in 2023, according to the median estimate in a central bank survey. Those forecasts are still above targets of 3.50% for this year and 3.25% next.  

Slow growth coupled with higher inflation and borrowing costs is hurting President Jair Bolsonaro’s standing ahead of October’s elections. His administration has extended a cash transfer program, while congress passed fuel tax cuts this month to cushion the blow on consumers. 

(Adds central bank’s pledge to deliver another 100 basis-point hike next meeting, adds comment from policy makers in third paragraph.)

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