After four and a half years, this week Brazil should return to base rates of more than 10% per annum | Economie

Meeting Coboom It is scheduled to set the interest rate level for Tuesday (first) and Wednesday (second). The result will be announced after the meeting.

Forecasts of financial market economists, compiled by BC in The survey was conducted with more than 100 financial institutions last weekIs this the The interest rate advances from the current 9.25% to 10.75% per annum.

If the move is confirmed, it will be the first time in four and a half years (since July 2017) that the rate will be double digits. At the time, Selic was at 10.25% annually.

Raise the current interest rate Started in March 2021, when Selic surged from a historic low of 2% to 2.75% annually. since then, There were seven consecutive hikesThe rate reached its highest level in more than four years.

Because of the increase in the basic rate of the economy, the In 2021, bank interest rates rose the most in six years at 33.9% annually. At around 350% annually, credit card rolling interest is the highest since August 2017.

Financial markets expect another increase in the Selic rate in 2022. The rate is expected to rise to 11.75% annually, next March, and to decline again only at the beginning of 2023 – when it declines to 11.25% annually.

The Central Bank raised interest rates to fight inflation, which amounted to 10.06% annually in 2021, highest in six years.

The Corporation operates on the basis of an inflation targeting system. When inflation is high, BC raises the Selic rate. When inflation estimates align with targets, Selic is reduced.

Last year, inflation was primarily driven by transportation, which provided the largest variance (21.03%) and the largest impact (4.19 percentage points) on this year’s IPCA.

Then came housing (13.05%), which contributed 2.05 percentage points, and food and beverages (7.94%), which contributed 1.68 percentage points. The three groups together accounted for about 80% of the 2021 Broad Consumer Price Index (IPCA, official inflation index).

Going up, inflation was well above the target ceiling for 2021, which was 5.25%. Under the current system, the IPCA can range between 2.5% and 5.25% to formally achieve the target. The official central target was 3.75%.

At the moment, BC is already targeting inflation targets for 2022 and 2023, the main target being, respectively, 3.5% and 3.25% per year. For this year, the Market estimates, so far, a new wave of inflation target.

Epidemiological factors and weather

According to Banco Alfa’s chief economist, Luis Otavio de Souza Leal, the potential increase in the interest rate to a level above 10% per year stems from a series of internal and external factors, such as the Covid-19 epidemic and other factors • climatic conditions, such as the water crisis – which It generated an increase in electricity and food prices.

“We must remember that we come from an unprecedented crisis [Covid-19], not because of the sheer size but because you don’t have any kind of previous experience of something similar. It was a bit of trial and error.”

He indicated that the price of Cilic has been reduced For up to 2% per yearsomething unprecedented, in order to avoid a recession in the economy.

At the time, some economists, such as those at the International Monetary Fund (IMF), predicted even A decrease of about 10% in GDP – which has not been confirmed. the The decline was 4.1% last year.

In addition to ultra-low interest rates, Lyell noted that a Strong public spending policyacross the Emergency aid worth R$600This stimulated inflation.

In addition, the lack of production inputs, due to the disruption caused by the epidemic, helped to increase prices.

Indexing is the most important characteristic of the cake in Brazil [mecanismo pelo qual uma alta de preços é transmitida para para o futuro]. The minimum wage has been corrected by 10% this year. This is fair, but the problem is that this feeds inflation as it turns into consumption,” the economist stated.

Leal expects the interest rate to return to the single-digit level (less than 10% per year) in 2023 and reach a lower level, close to 6% per year, from 2024, but only if the elected government implements the public accounts credibility policy and implements reforms Economic.