Interest Rates in Brazil Rise to 13.75 Percent

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Brazilian Central Bank’s Comitê de Política Monetária – Copom (Monetary Policy Committee) decided unanimously on Wednesday (June 3rd) to increase the country’s benchmark interest rate (Selic) by 0.5 percentage points from 13.25 percent to 13.75 percent per year. This is the sixth consecutive time the Selic has increased.

“Assessing the macroeconomic scenario and the perspectives for inflation, the Copom decided, unanimously, to increase the Selic rate by 0.50 percentage points to 13.75 percent per year, without bias,” said the Copom statement after the meeting.

The latest increase of the Selic shows the country going in the opposite direction of its international counterparts with growth well below average and interest rates much higher than most other countries, says Fecomercio-RJ (Rio de Janeiro Commerce Association), “We are on the tailgate in terms of growth and leading when it comes to interest rates,” said the association in a press release Wednesday night.

For the association what is needed is a structural reform. “It is time to increase the efficiency of public spending, reduce tax burdens, encourage investments and expand corporate productivity, which will in turn help contain inflation,” adds the note.

With rising inflation and unemployment, and declining production and economic activity, analysts predict a very hard economic year for the country. The latest Focus Report released by the Central Bank on Friday, May 29th forecasts inflation at 8.39 percent at the end of the year, foreign exchange rate at R$ 3.20/US$, and the Selic increasing a bit further, to fourteen percent by December 2015.