Brazil economic activity falls more than expected in July

FILE PHOTO: A drone view shows the central bank's headquarters in Brasilia, Brazil, December 26, 2024. REUTERS/Ueslei Marcelino/File Photo

BRASILIA (Reuters) -Brazil's economic activity declined more than expected in July, marking a third consecutive monthly decline, a central bank index showed on Monday, highlighting a slowdown in Latin America's largest economy as borrowing costs remain high.

The IBC-Br index, a proxy for gross domestic product, fell 0.5% in July from the previous month on a seasonally adjusted basis, compared with the 0.2% drop expected in a Reuters poll.

The index incorporates central bank estimates for farming, industry and services, along with production-related taxes, all of which posted negative readings in the month.

The index rose 3.5% in the 12 months through July, according to non-seasonally adjusted data.

Brazil's benchmark Selic rate stands at 15%, near a two-decade high, as policymakers try to rein in annual inflation that has consistently exceeded the 3% target.

The central bank will announce its next policy decision on Wednesday, with markets widely expecting rates to remain unchanged, in line with earlier guidance.

On Friday, the Finance Ministry cut its 2025 GDP growth forecast to 2.3% from 2.5%, citing weaker-than-expected second-quarter performance and pressure from high interest rates.

(Reporting by Marcela Ayres; Editing by Aidan Lewis)