SAO PAULO — Brazil’s central bank has announced its biggest interest rate rise since 2002, ratcheting up a fight against inflation that is in the double digits as investors fear a pre-election government spending splurge.

Latin America’s most populous nation is witnessing some of the sharpest price rises among major economies, driven by factors including higher fuel costs, a weakened exchange rate and a drought that has pushed up energy bills.

The Banco Central do Brasil, or BCB, has taken a hawkish stance and on Wednesday stepped up the pace of tightening. Its monetary policy committee decided unanimously in favour of a 150 basis point jump, up from increases of 100bp at the previous two meetings, lifting the benchmark Selic rate to 7.75 per cent.

The BCB said it foresaw an adjustment of the same magnitude at its next meeting. The central bank has raised rates six times so far this year. Pressure had been building for a more aggressive response following turbulence in financial markets on growing fears about Brazil’s fiscal discipline.

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