2023-07-28 23:25:14
By Patricia Vilas Boas
SÃO PAULO (Reuters) – Finance Minister Fernando Haddad said this Friday that there is room for a “reasonable” cut in the Selic rate by the Central Bank and that the autarchy is in a position to start the downward cycle with a consistent low, stating that the economy has suffered a slowdown due to the current level of interest rates.
Haddad stated that the current basic interest rate, at 13.75% per year, is far from the neutral level, a level that does not boost or slow down the economy, and that falls in different sectors of inflation justify the end of the monetary tightening cycle.
“I really think there is room for a reasonable cut, a reasonable start to cut, because we are very far from what the Central Bank calls a neutral interest rate”, said the minister in an interview with journalists. “So there’s a generous amount of space there to take advantage of.”
Asked about the possible volume of reduction for the Selic rate, Haddad replied: “If we want to reach a neutral interest rate level, we would have to cut the real interest rate by 5%, which is ten ‘Copoms’ at 0.5 pp “.
According to a survey carried out by Reuters, the Central Bank is likely to cut the Selic rate for the first time in three years when it closes its August monetary policy meeting next week, amid signs of cooling down in inflation and greater optimism about the conjuncture. economy in Brazil, with most economists betting on a mild easing pace.
The view of 36 out of 46 economists consulted in a Reuters poll is that the Central Bank will cut basic interest rates by 0.25 percentage points when it meets on August 1st and 2nd.
In the interview, Haddad stated that despite the positive indicators, such as the drop in unemployment to 8% in the second quarter announced this Friday by the Brazilian Institute of Geography and Statistics (IBGE), the economy is “suffering a process of deceleration” due to interest rates in the double digits.
“The economy is suffering a process of deceleration due to the real interest in the house of 10%, which is almost double the country that charges the most interest after Brazil”, he said.
“The winds are favorable, the world is looking at Brazil with different eyes, with another perception, but it is high time for us to align fiscal and monetary policy”.
The finance minister’s comments came after the DBRS Morning Star agency raised Brazil’s long-term credit rating this Friday to “BB”, against “BB (low)”.
This is the third rating agency to improve the country’s position recently, after Fitch, on Wednesday, raised from “BB-” to “BB”, and S&P changed the outlook from “stable” to “positive”. ” in June.
Haddad added that the agenda of the Chamber of Deputies for next month is “well aligned” in relation to two priority government projects, the guarantee framework and the fiscal framework. He stated that the government depends on the final approval of the fiscal framework to conclude the piece of the Budget Law Project (PLO).
“The framework needs to have its solution defined, even so that the budget piece can be completed and forwarded to Congress. We depend on this decision to finalize the PLO text”. Before going into recess, the Chamber concluded the vote on the tax reform and the Carf, but postponed the analysis of the new fiscal framework to August.
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