Brazilian economic activity fell in October this year, according to information released this Monday (15) by the Central Bank (BC). The Central Bank’s Economic Activity Index (IBC-Br) decreased 0.2% compared to the previous month, considering seasonally adjusted data (adjusted for the period).
In comparison with October 2024, there was a positive change of 0.4%, without adjustment for the period, as the comparison is between equal months. In the year to date, the indicator was positive at 2.4% and, in 12 months, it registered an increase of 2.5%.
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 about the basic interest rate, the Selic, currently set at 15% 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 Selic, 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.
The rise in the price of airline tickets made November inflation reaches 0.18%. In October, the IPCA was 0.09%. As a result, inflation accumulated over 12 months is 4.46%, within the inflation target range of 1.5% to 4.5%.
The decline in inflation and these indicators, such as the IBC-Br, which show moderation in domestic growth, led to maintenance of Selic for the fourth time in a rowat the last meeting of the year, last week.
The Copom gave no clue as to when it should start cutting interest rates. In a statement, the BC informed that the current scenario is marked by great uncertainty, which requires caution in monetary policy, and that the BC’s strategy is to maintain the Selic at this level for a long time.
The rate is at its highest level since July 2006, when it was 15.25% per year. After reaching 10.5% per year in May last year, the rate began to be raised in September 2024. The Selic reached 15% per year at the June meeting, having been maintained at that level since then.
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 published by IBGE. 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. Driven by the expansion of services and industry, in second quarter of this year the Brazilian economy grew 0.4%.
In 2024, GDP closed with an increase of 3.4%. The result represents the fourth consecutive year of growth, being the biggest expansion since 2021, when GDP reached 4.8%.
