The announcement of the maintenance of the Selic rate, basic interest rate of the Brazilian economy, at 10.5% per yeargenerated different reactions from institutions linked to the country’s industrial and commercial sectors. While for some, the decision by the Central Bank’s Monetary Policy Committee (Copom) represents restrictions on economic activity, for others, it reflects uncertainty about the balance of public accounts.
In June, Copom had already interrupted the sequence of interest rate cuts. Between August of last year and March of this year, there was a constant reduction of 0.5 percentage points at each meeting. In May, the cut was 0.25 percentage points.
See the institutions’ positions on Copom’s decision:
CNI
The National Confederation of Industry (CNI) said that maintaining the interest rate is worrying, as it considers that it results in high credit costs and restricts Brazilian economic activity.
“We hope that the Selic rate will be reduced again as soon as possible. The resumption of cuts is essential to reduce the financial costs borne by companies, which accumulate throughout the production chains, and by consumers. Otherwise, we will continue to penalize not only the Brazilian economy, but mainly Brazilians, with fewer jobs and income,” said CNI president Ricardo Alban.
Firjan
The Federation of Industries of the State of Rio de Janeiro (Firjan) understands that fiscal uncertainties are jeopardizing the reduction of the Selic rate and that maintaining the rate reflects a scenario of economic uncertainty and inflationary pressures. The institution argues that a sustainable resumption of interest rate cuts depends directly on the balance of public accounts. And that, even though the freeze in the 2024 Budget has brought relief, “the absence of a structural spending cut agenda increases country risk, devalues the local currency and deteriorates inflationary expectations”.
FecomercioSP
The Federation of Commerce of Goods, Services and Tourism of the State of São Paulo (FecomercioSP) argues that Copom was right to maintain the Selic rate and that there was no room for another decision. According to the organization, there is a situation of pressured exchange rates, inflation accelerating again and uncertainties in the fiscal scenario.
For FecomercioSP, the context may even indicate the need for an increase in interest rates, even if small. Only a clearer fiscal stance from the government could change the situation.
CNC
The National Confederation of Commerce (CNC) considered Copom’s decision to be detrimental to the production sector, as it increases interest rates. However, it acknowledged that, given the deterioration in inflation, the measure is important for stabilizing the macroeconomic scenario. The CNC highlighted the increase in retail sales, the low unemployment rate at historic levels and high disposable income, which would mean solid economic activity and the labor market. On the other hand, it reinforced that, despite the increase in tax collection, the fiscal scenario continues to raise concerns.
Trade Union Force
Força Sindical described Copom’s decision as absurd. It said that the country remains hostage to the interests of rentiers and that higher interest rates reward speculators. In a note, the institution stated that Brazil is losing another chance to invest in production, consumption and job creation. And that the payment of interest by the government significantly consumes and restricts the country’s growth possibilities, as well as investments in education, health, security and infrastructure.
