For the fourth month in a row, in October this year, Brazilian economic activity grew, according to information released this Friday (13) by the Central Bank (BC), in Brasília. The Central Bank’s Economic Activity Index (IBC-Br) registered an increase of 0.1% in October compared to September, according to seasonally adjusted data (adjusted for the period).
In the month, the IBC-Br reached 154.4 points. In comparison with October 2023, there was growth of 7.3% (without adjustment for the period, as the comparison is between equal months). In the 12 months, the indicator was also positive at 3.4%.
The IBC-Br is a way of evaluating the evolution of the country’s economic activity and helps the BC’s Monetary Policy Committee (Copom) to make decisions on the basic interest rate, the Selic, currently set at 12.25% per year.
The index incorporates information on the level of activity in sectors of the economy – industry, commerce and services and agriculture –, in addition to the volume of taxes.
Selic is the BC’s main instrument for achieving the inflation target. When Copom increases the basic interest rate, the purpose is to contain heated demand and this has an impact on prices because higher interest rates make credit more expensive and encourage savings. Therefore, higher rates help to reduce inflation, but they can also hinder the expansion of the economy.
When the Copom reduces the Selic, the tendency is for credit to become cheaper, encouraging production and consumption, reducing control over inflation and stimulating economic activity.
Inflation
The country’s official inflation lost strength from October to November and closed the last month at 0.39%. In October, the Broad National Consumer Price Index (IPCA) was 0.56%. Over the past 12 months, inflation has reached 4.87%, above the target ceiling of 3%, which has a tolerance of 1.5 percentage points more or less.
The recent rise in the dollar and the uncertainties surrounding inflation and the global economy made the BC increase the pace of interest rate hikes at last Wednesday’s meeting (11). The body informed that it will raise the Selic rate by one percentage point in the next two meetings, in January and March, if the scenarios are confirmed.
This was the third consecutive increase in the Selic. The rate returned to the level of December last year, when it was 12.25% per year. The increase consolidates a cycle of contraction in monetary policy.
After spending a year at 13.75% per year – between August 2022 and August 2023 – the rate had six cuts of 0.5 points and a cut of 0.25 points between August of last year and May of this year.
At the June and July meetings, the Copom decided to maintain the rate at 10.5% per year, starting to increase the Selic at the September meeting, when the rate rose 0.25 points, and November, when it rose 0.5 points.
Gross Domestic Product
Released monthly, the IBC-Br employs a different methodology from that used to measure the Gross Domestic Product (GDP), which is the official indicator of the Brazilian economy. According to the BC, the index “contributes to the development of the country’s monetary policy strategy”, but “is not exactly a preview of GDP.”
GDP is the sum of all final goods and services produced by a country. With a quarterly result, exceeding projections, in the third quarter of the year the Brazilian economy grew 0.9% compared to the second quarter of 2024, according to the Brazilian Institute of Geography and Statistics (IBGE). The accumulated increase in the year, from January to September, is 3.3%. In 2023, Brazil’s GDP grew 3.2%.
