The Monetary Policy Committee (Copom), of the Central Bank (BC), defines today (3), in Brasília, the basic interest rate, the Selic. According to the most recent edition of the Focus bulletin, a weekly survey with market analysts, the Selic rate should rise from 13.25% to 13.75% per year, up 0.5 percentage points. Market analysts expect the rate to remain at that level until the end of the year.
In the minutes of the last meeting, Copom members indicated that they intended to increase the Selic once again by 0.5 or 0.25 percentage points, but left open the possibility of promoting new highs if inflation persists.
Until May, BC communiqués indicated that the monetary authority intended to end the cycle of increases in June. However, higher than expected – promoted by the Federal Reserve (Fed, Central Bank of the United States) and the European Central Bank – added pressure on Brazilian interest rates.
After rising in recent months, inflation estimates have fallen. The latest edition of the Focus bulletin reduced the official inflation forecast by the Broad National Consumer Price Index (IPCA) from 7.30% to 7.15% this year. In June, projections for the IPCA reached 9%.
While gasoline and electricity have become cheaper in recent months, the war between Russia and Ukraine continues to impact prices for diesel, fertilizer and other imported goods. In addition, the instability in the US economy, which is facing the highest inflation in the last 41 years, causes strong volatility in the value of the dollar across the planet.
For 2022, the inflation target to be pursued by the BC, defined by the National Monetary Council, is 3.5%, with a tolerance interval of 1.5 percentage points upwards or downwards. That is, the lower limit is 2% and the upper limit is 5%. Analysts believe that the target ceiling will be breached for the second year in a row.
Selic rate
The basic interest rate is used in the negotiation of public securities issued by the National Treasury in the Special System for Settlement and Custody (Selic) and serves as a reference for other rates in the economy. It is the Central Bank’s main instrument to keep inflation under control.
However, interest rates on credit do not vary in the same proportion as Selic, as Selic is only a part of the cost of credit. Banks also consider other factors when defining the interest charged to consumers, such as default risk, profit and administrative expenses.
Copom
The Copom meets every 45 days. On the first day of the meeting, technical presentations are made on the evolution and prospects of the Brazilian and world economies and the behavior of the financial market. On the second day, the members of the committee, formed by the BC board, analyze the possibilities and define the Selic.
