Real interest rates adjusted for inflation are expected to be 7.4% over the next 12 months.
The forecast comes from Austin Rating’s chief economist, Alex Agostini.
Austin Rating is a São Paulo-based rating agency specializing in Brazil.
From February 2021 to September 2022, the rate has increased by 13.7 percentage points.
The percentage is high because inflation is falling and the central bank has signaled that it will keep the benchmark interest rate, the Selic, at 13.75% per year for an extended period.
The survey was based on the “ex-ante” projection, i.e. when annualized interest rates are calculated based on forecasts for the next 12 months.
According to the estimate, real interest rates were negative for 20 months from March 2020 to October 2021.
The lowest level was reached in February 2021 at -6.3%.
In the “ex-post” calculation, which considers estimates for the 12 months preceding the reporting month, the real interest rate in Brazil was 3.3%, according to the estimate.
During this period, inflation was higher, and the Selic was on its way up.
In this calculation, real interest rates were negative from October 2020 to July 2022, or 22 months.
The lowest value was reached in September 2021, at -6.6%.
It increased by 9.9 percentage points to the current September value of 3.3%.
The Central Bank (BC) decided on Wednesday (Sept. 21) to keep the prime rate, the Selic, stable at 13.75% per year.
It said it would remain at that level for a “sufficiently long period of time.”
The decision was not unanimous, with seven directors in favor of maintaining the rate and two in favor of a 0.25 percentage point increase.
The Selic rate had increased for 12 consecutive meetings.
The central bank’s directors form the committee.
They meet every 45 days to set interest rates. The next meeting will be held on October 25 and 26.
The Selic is the main instrument to control inflation, which is high in the country and worldwide.
Nevertheless, the IPCA (National Consumer Price Index) has slowed down in the last two years due to the fuel tax reduction.
The rate fell to 8.73% in the 12 months accumulated through August. In July, it stood at 10.07%.
Even as inflation slows, it remains 5.23 percentage points above the 3.5% inflation target.
With information from Poder360