For the second month in a row, Brazilian economic activity grew in February this year, according to information released on Friday (11) by the Central Bank (BC). The Central Bank Economic Activity Index (IBC-BR) registered a 0.4% increase in February compared to the previous month, considering the outset data (adjusted for the period).
In the month, IBC-BR reached 108.8 points. Compared to February 2024, there was 4.1% growth (no adjustment to the period, as the comparison is between equal months). Accumulated in 12 months, the indicator was also positive at 3.8%.
IBC-BR is a way of assessing the evolution of the country’s economic activity and helps BC’s monetary policy committee to make decisions about the basic interest rateSelic, currently defined at 14.25% per year. The index incorporates information on the level of activity of economy sectors – industry, commerce and services and agriculture – as well as tax volume.
Selic is the main instrument of the BC to reach the inflation target. When Copom increases the basic interest rate, the purpose is to contain heated demand and this causes reflexes in prices because higher interest rates make credit more expensive and stimulate savings. Thus, higher rates help reduce inflation, but can also make it difficult to expand the economy.
When Copom decreases Selic, the tendency is for credit to be cheaper, with incentive to production and consumption, reducing control over inflation and stimulating economic activity.
Inflation
In March, inflation slowed down, being below the February rate, when it was 1.31%. Pulled by food prices last month, the Broad National Consumer Price Index (IPCA) was 0.56%, according to the Brazilian Institute of Geography and Statistics (IBGE).
In 12 months, official inflation measured by the IPCA adds 5.48%, above the 3%target ceiling, which has 1.5 percentage point tolerance to more or less.
THE high food price and the energy and uncertainties around the global economy made the BC once again increase interest at a percentage point at the last meeting in March, Selic’s fifth rise in a cycle of contraction in monetary policy.
In a statement, Copom reported that the Brazilian economy is heated, despite signs of moderation in expansion. According to the collegiate, full inflation and nuclei (as it excludes more volatile prices such as food and energy) remain high. The agency warned that there is a risk that service inflation remains high and said it will continue to monitor the government’s economic policy.
Regarding the next meetings, Copom said it will raise Selic “less magnitude” at the May meeting and left no clues about what will happen after that.
Gross domestic product
Published monthly, IBC-BR employs a different methodology from that used to measure Gross Domestic Product (GDP), which is the official indicator of the Brazilian economy released by IBGE. According to the BC, the index “contributes to the elaboration of monetary policy strategy” of the country, but “it is not exactly a preview of GDP.”
GDP is the sum of all final goods and services produced by a country. In 2024, the Brazilian economy grew 3.4%. The result represents the fourth year in a row in growth, with the highest expansion since 2021, when GDP reached 4.8%.
