Events
Central Bank increases basic interest rate again. See what changes
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The Central Bank's Monetary Policy Committee (Copom) raised the interest rate (Selic) to 13.75 per year for the 12th consecutive day. This is the highest level since 2017, but the market expects a new high in September.
Central Bank measures
The movement to tighten monetary policy began last year, when interest rates reached a historic low of 2. Since then, new measures approved by the government in conjunction with the Central Bank have increased fiscal uncertainty in the country.
In a note, the Central White Committee, Copom, mentioned inflation expectations. For a horizon of 6 quarters ahead, the IPCA projection is 3.5 in 12 months. The relevant horizon is 2023 and, to a lesser extent, 2024. The Copom chose to emphasize 12-month inflation in the first quarter of 2024. The Copom will maintain its strategy until disinflation is consolidated and anchored around the target, he wrote.
Why increase Selic?
The increase in the basic interest rate makes credit more expensive and leads to a slowdown in the economy, reducing inflation. As a result, prices tend to fall or remain stable.
The Central Bank set the inflation target for 2023 at 3.25, with a tolerance interval of 1.5 percentage points plus or minus. Analysts are already assuming that the limit will be exceeded for the second year in a row.
Brazil continues to have the highest real interest rate in the world, net of inflation, of any list of 40 economies. Brazil's real interest rate is around 8.52 per year, more than double that of second place (Mexico at 4.20), according to data from MoneYou and Infinity Asset Management.
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About the author / Tiago Menger
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