Brazilian Central Bank has decided to increase the basic interest rate to 12,25% annual, after that last Copom meeting, held on 11th December. The Selic tax, previously with 11,25% in November, influences other types of country interests, such as those of loans, credits, financing and financial investments. This rate is the principal instrument used by the Central Bank in order to control inflation and protect currency value.
In its release after the meeting, Copom pointed out that the external environment continues to be complex, mainly due to the economic uncertainty in the United States. Therefore, this situation generates doubts about the pace of the slowdown, disinflation and the future stance of the national Federal Reserve.
According to the Focus Report projections, the Selic rate was expected to be around 12% per annum by the end of 2024 as of 9 December. This report, published weekly, compiles market expectations on various economic indicators, including inflation, economic activity, the exchange rate and the Selic rate.
The Monetary Policy Committee meets approximately every 45 days to review and set the interest rate. At this meeting, Copom evaluates the pace and magnitude of future rate adjustments, based on the evolution of inflation, price expectations, the output gap and economic risks. In addition, it is expected that the fiscal policy and public spending reduction measures being considered by the government will contribute to lower inflationary expectations.
With this increase, the Selic rate reaches its highest level since November 2023. It should be recalled that in July 2023 the rate was at 13.75% per annum, but since then the Central Bank began a cycle of reduction. In June 2024, the rate was adjusted to 10.5%. However, in September 2024 there was a change of trend in monetary policy, ratified with the November and December increase.
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