The Monetary Policy Committee (Copom) of the Central Bank unanimously decided to increase the basic interest rate (Selic) of the Brazilian economy, from 13.25% to 13.75% per year. It is the 12th consecutive increase since March 2021, when the current upward trajectory began, and the highest interest rate in the last six years. The Selic rate has not registered such a high rate since December 2016, when it was just 13.75%.
Despite this, the 0.5 percentage point increase announced this Wednesday (3) may not represent the end of the monetary tightening cycle. In view of expectations of higher inflation for 2023, some institutions already expect the Selic to end the year at 14%. The increase in interest rates is the BC’s main instrument to contain inflation, as it makes credit more expensive and, consequently, reduces consumption.
The latest Focus report, released on Monday (1st), points out that IPCA projections for next year have been on the rise for 17 weeks. Currently, the midpoint is at 5.33%, above the 2023 target threshold of 4.75%. “The Committee will assess the need for a residual adjustment, of lesser magnitude, at its next meeting”, informed the Copom when announcing the increase to 13.75%. The next meeting is scheduled for the second half of September.
