2023-12-13 22:38:03
Brasilia (awp/afp) – The key rate in Brazil will end the year at 11.75%, thanks to a fourth consecutive reduction of 0.50 points on Wednesday, the Central Bank having continued the movement forcefully demanded by President Lula.
This interest rate, called Selic, remains one of the highest in the world. It was lowered for the first time in three years at the beginning of August, going from 13.75% to 13.25% thanks to a significant slowdown in inflation.
The Monetary Policy Committee of the Central Bank (Copom) then reduced it to 12.75% in mid-September, then to 12.25% at the end of October.
Left-wing President Luiz Inacio Lula da Silva pushed for a reduction in the key rate upon his return to power for a third term in January, engaging in a standoff with the president of the Central Bank.
According to Lula, high interest rates are hampering the growth of Latin America’s largest economy, making access to credit more difficult for consumers and for business investments.
Copom, which unanimously decided to lower the Selic to 11.75%, indicated Wednesday in a press release that it was considering making a reduction “of the same magnitude” during its next meetings, starting by the premiere of 2024, at the end of January.
Analysts and other financial institutions consulted for the Central Bank’s weekly Focus survey expect a key rate of 9.25% at the end of next year.
On Tuesday, the IBGE statistics institute announced that inflation over one year had returned to a level compatible with the objective set at the start of the year by the Central Bank, at 4.68%.
This objective was 3.25%, with a tolerance margin of 1.5 points, for a range from 1.75% to 4.75%.
Next year, the Central Bank is targeting inflation at 3%, but analysts expect a price increase of 3.93%. The pace of rate cuts might therefore be slowed in the future.
Brazil saw its growth slow to 0.1% in the third quarter, but it managed to remain in the green, despite experts’ forecasts of contraction.
Finance Minister Fernando Haddad said last week that Brazil would see growth “above 3%” in 2023.
But for this trend to materialize, he called on the Central Bank to “do its job” by continuing the cycle of lowering the key rate.
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