2023-06-20 18:20:00
Analysts predict the beginning of the decline in August thanks to a deceleration in inflation figures.
The Central Bank of Brazil (BCB) is expected to keep its main interest rate at 13.75% on Wednesday, according to analysts who forecast a start of the decline in August thanks to a deceleration in inflation figures.
The BCB’s Monetary Policy Committee (Copom), which sets the level of the Selic benchmark rate, the main tool to fight inflation, began its fourth meeting on Tuesday since the return to power in January of leftist President Luiz Inacio. Lula da Silva.
No movement is expected, according to the consensus of more than a hundred financial institutions and consulting firms interviewed by the economic daily Valor.
If the Copom keeps the rate unchanged, it would remain at 13.75% for the seventh consecutive time, its highest since January 2017 in Brazil.
This level “has no explanation”, criticized Lula on Monday, stepping up his attacks on the eve of the Copom of the BCB, whose leaders are in his line of sight.
Lula, who is campaigning for a drop in the rate of access to credit, repeated that this high rate was hampering growth, slowing down investment and job creation, while “there are people who are hungry”.
For his part, the president of the BCB, Roberto Campos Neto, who resisted the pressure for months with technical arguments, recently softened his speech by mentioning a possible rate cut “in the future”, underlining the market “confidence” and encouraging economic data.
The good performance of the Brazilian economy surprised in the first quarter, with growth of +1.9%, contradicting projections of weak growth due to high rates.
According to the Central Bank’s weekly Focus survey, analysts and consultants raised their GDP growth forecast for 2023 to +2.14% from +1.20% a month ago.
Highest rate in the world
In September 2022, the Copom had ended a cycle of twelve consecutive increases, thanks to a gradual decline in inflation. The interest rate has since August been set at 13.75%, the highest in the world in real terms (excluding inflation), according to investment manager Infinity Asset.
In March 2021, the Selic was at a historic low of 2%, in order to stimulate consumption during the Covid-19 pandemic.
However, the moderate rise in prices over the past few months confirms the government’s desire to ease rates. Monthly inflation was 0.23% in May, while the 12-month consumer price index rose to 3.94%, below the central bank’s annual target ceiling (4. 75%).
Nevertheless, the market’s inflation expectations for the end of the year, as expressed in the Focus survey, are slightly higher, at 5.12%. The Selic should therefore end the year at 12.25%, following a cautious start to a rate cut of 25 percentage points.
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