2023-08-03 01:49:00
The Monetary Policy Committee (Copom) of the Central Bank reduced, this Wednesday (2), the Selic, its basic interest rate, by 0.5 percentage points, to 13.25%, the first cut in three years, which starts a cycle of “flexibilization”.
After a year without changes in the basic interest rate, the Copom assessed that “the improvement in the inflationary scenario” provided the “necessary confidence to start a gradual cycle of monetary easing”, informed the BCB in a note.
President Luiz Inácio Lula da Silva has repeatedly insisted, since taking office in January, on reducing interest rates in order to make credit cheaper and encourage consumption and investment.
The 0.5% cut decided by the Copom was anticipated by a large part of the market in a survey of more than 100 consultancies and financial institutions carried out by the economic newspaper Valor, although the majority predicted a smaller reduction, of 0.25%.
“While much of the market expected 0.25%, we were in for a surprise,” said AFP Vinicius Romano, an analyst at consultancy Suno Research.
The monetary policy committee “assessed the alternative of reducing the basic interest rate to 13.50%, but considered it appropriate to adopt a pace of decrease of 0.50 percentage points at this meeting due to the improvement in the inflationary scenario”, says the statement. .
Inflation has been losing steam in recent months: in June, it fell to 3.16% in 12 months, the lowest level since September 2020.
The Copom foresees a “reduction of the same magnitude in the next meetings”, but stressed that the size of the cut “total of the easing cycle” will depend on how inflation will evolve.
– ‘Dialogue of an absolutely technical nature’ –
The Minister of Finance, Fernando Haddad, praised the Copom’s decision and said that it is the result of an “absolutely technical dialogue” between the Central Bank and his portfolio.
“We are committed to combating inflation and also to fiscal responsibility,” guaranteed Haddad.
“Inflation is under control, the economy is going to start replanning itself. Players, investors, consumers and families are going to start replanning themselves for a Brazil with sustainable growth, from the fiscal, social and environmental point of view”, added the minister.
Earlier, Lula had said that the Copom should have already reduced the rate “three meetings ago” and again criticized BC president Roberto Campos Neto: “He doesn’t understand Brazil and he doesn’t understand the people,” he said hours before the announcement. .
The market expects GDP growth of 2.24% for this year, according to forecasts in the Central Bank bulletin Focus.
This is the first time in three years that the BCB cuts the Selic rate. The last one, in August 2020, was a reduction of 0.25%, which placed the base rate at 2%, with the aim of boosting an economy heavily affected by the covid-19 pandemic.
The interest rate had been at 13.75% since August last year, when the Copom interrupted the upward cycle that started in March 2020, starting from the historic low of 2%.
However, even with this Wednesday’s reduction, Brazil’s interest rate remains the highest in the world in real terms, that is, discounting inflation, according to the specialized website MoneYou.
In a statement, the National Confederation of Industry (CNI) praised Copom’s decision to reduce the rate, as high interest rates “have significantly compromised economic activity in 2023”, it said.
The climate has been improving for the Brazilian economy. Last week, credit rating agency Fitch raised Brazil’s sovereign debt rating from BB- to BB, due to “a better-than-expected macroeconomic and fiscal performance”.
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