BRASÍLIA, March 19, 2026 (BSS/AFP) - Brazil's Central Bank lowered its benchmark interest rate on Wednesday for the first time in nearly two years, though it urged caution due to fuel price volatility caused by the Iran war.

The bank lowered the key rate, known as the Selic and currently one of the highest in the world, to 14.75 percent from 15 percent.

Since returning to power in 2023, leftist leader Luiz Inacio Lula da Silva has called for a rate cut to stimulate the economy of the South American giant, as the 80-year-old leader seeks a fourth term in elections set for October.

"The international environment has become more uncertain with the escalation of geopolitical conflicts in the Middle East, with consequences for global finance," the central bank's Monetary Policy Committee said.

"Such a situation demands caution on the part of emerging economies, in a context of increased price volatility for financial assets and raw materials," it added.

Lula has already announced temporary measures to limit fuel price increases after global oil prices surged when Iran moved to block tanker traffic through the Strait of Hormuz, a key Gulf transit route.

In particular his government suspended taxes on diesel fuel, which Brazilian truckers rely on to get goods to stores.

Brazil's inflation slowed to an annual rate of 3.8 percent in February, within the range targeted by the central bank. But economists noted the decline was due in part to lower fuel prices -- which could again turn higher if the war in the Middle East drags on.