Brazil has the highest real interest rates in the world

Brazil has the highest real interest rates in the world, according to a ranking published by the asset manager Infinity Asset. It is in 1st place in a list made with 40 countries.

The real interest rates are those corrected by inflation. Infinity drew the projection for the next 12 months, which is the “ex-ante” calculation.

In December 2021, the estimated Brazilian real interest rates were 5.03%, below Turkey’s (5.83%).

The chief economist of Austin Rating, Alex Agostini, calculated that the rate would be 7.8% in the next 12 months, starting in December.

From February 2021 to December 2022, the rate rose 14.1 percentage points.

The percentage is high because inflation is falling, and the BC (Central Bank) has signaled that it will maintain the basic rate, the Selic, at 13.75% per year for an extended period.

According to the estimate, real interest rates were negative for 20 months, from March 2020 to October 2021.

It reached its lowest level in February 2021, at -6.3%.

When considering the “ex-post” calculation, when estimates for the 12 months before the reference month are taken into account, Brazil’s real interest rates were 6% in December, according to the estimate.

In the period, inflation was higher, and the Selic was on an upward trend.

In this calculation, real interest rates were negative from October 2020 to July 2022, or 22 months.

The lowest peak was in September 2021, at -6.6%. It rose 12.6 percentage points to its current December level of 6%.

SELIC RATE

The basic rate, the Selic, will end the year at 13.75% a year. The BC (Central Bank) decided on Wednesday (December 7) to maintain the base interest rate for the 3rd meeting in a row.

The financial market expected the decision. Here is the full communiqué (56 KB).

The monetary authority raised the tone on fiscal risks and left the door open to raising the Selic in case of need.

In a statement, the monetary authority said there is “high uncertainty” about the future of public accounts and that more fiscal stimulus to boost demand could raise the trajectory of inflation.

The Central Bank’s warning was made after the presentation of the transition PEC (proposal of amendment to the Constitution), which allows spending outside the constitutional amendment that limits public spending.

The president-elect’s team, Luiz Inácio Lula da Silva (PT, progressive-globalist), defends the approval of the text to fund, among other items, the R$600 Family Grant.

The fiscal uncertainties pose risks for investments in Brazil.