Press vehicles that cover the financial market are referring to this March 22 as “super Wednesday”, because the central banks of Brazil and the United States decide what their basic interest rates will be.
Such indexes have great influence in virtually all sectors of the economy, influencing inflation rates and bank lending, for example, although many such vehicles stick only to “market” sensitivities.
Survey carried out by the investment manager Infinity Asset Management in more than 150 countries showed that Brazil currently has the highest real interest rate (calculated when the inflation index is deducted from the basic interest rate) in the entire planet. There are almost 8 percentage points of difference between the 13.75% of the Selic Rate and the official inflation of the last 12 months, which is at 5.77%.
This discrepancy favors financial speculators, since the money invested yields more at a standstill than subject to the uncertainties of the “real economy”, which generates jobs. The high Selic also hinders the economic recovery by making it more difficult to settle debts assumed, due to interest.
For this reason, the last few days have seen protests called by trade union centrals to draw attention to the problems caused by the rate and to pressure the Monetary Policy Committee (Copom) of the Central Bank (BC), responsible for defining the Selic Rate, to lower the index. . The Central Bank defends the high Selic as a way to contain inflation.
Even before assuming the federal government for the third time, current President Luiz Inácio Lula da Silva (PT) took a strong position against high interest rates. The BC is presided over by Roberto Campos Neto, appointed by Jair Bolsonaro (PL), who in 2021 signed a law that determined the bank’s autonomy in relation to the government – in practice, taking away from Lula the prerogative of appointing the head of the bank.
“I will wait for this citizen (Campos Neto) to finish his mandate so that we can make an assessment of what the independent Central Bank meant. Is this country working? Is this country growing? Are people getting better? No. So, I want to know what independence was for”, said Lula in February. The mandate to which he refers runs until December 31, 2024.
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A recent survey carried out by the Quaest institute shows that the president is not alone – quite the contrary: 76% of the population believes that he is right to press for a drop in the rate.
In the USA
The meeting of the Federal Reserve (Fed), equivalent in the United States to the Central Bank, will be heavily influenced by the failures of Silicon Valley Bank and Signature Bank, last week. If before US financial market analysts made predictions of hikes in interest rates in the country, now, the trend is towards stability. The current level is the range of 4.5% to 4.75%.
Economist André Roncaglia, a professor at the Federal University of São Paulo (Unifesp), told the Brazil in fact that bankruptcies will make the Federal Reserve recalculate the route, and this could have a direct influence on Brazil.
“Having an American Central Bank raising interest rates less implies for Brazil greater space for the Brazilian Central Bank to initiate or accelerate the process of cutting interest rates here”, pointed out Roncaglia.
What is the Selic Rate?
Used as a reference for all credit operations, the Selic is the rate paid by the government when borrowing from investors. As the risk of default in these operations is very low (since it is extremely unlikely that the government will default on its creditors), it tends to be the lowest interest rate in the country. Other operations, involving citizens or companies, have higher interest rates due to the greater risk of default.
Editing: Rodrigo Durão Coelho
