Brazil no longer has the highest real interest rate in the world after a new Selic cut; see ranking

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The country has been at the top of the podium since October 2022. After the 0.50 percentage point reduction in the basic rate by Copom this Wednesday, Mexico took the lead in the list that compares rates in 40 countries. Central Bank Headquarters in Brasília Raphael Ribeiro/BCB With another drop in the Selic rate this Wednesday (20), Brazil no longer has the highest real interest rate in the world — a place it has held since October 2022, according to survey compiled by MoneYou. The list shows that the country was surpassed by Mexico after the Monetary Policy Committee (Copom) announced a 0.50 percentage point cut in the country’s basic interest rate, to 12.75% per year. Real interest is formed by the country’s nominal interest rate minus the inflation forecast for the next 12 months. It is a measure of comparison of monetary tightening between several countries. With the reduction announced this Wednesday by the Central Bank, the country’s real interest rates now stand at 6.30%. Firstly, Mexico accumulates real interest rates of 6.61%. At the opposite end of the ranking is Argentina, which despite having the highest nominal rates on the list (118% per year), also faces hyperinflation, which brings down real rates. See below the main results from the list of 40 countries. Second interest rate cut The country began a cycle of falling basic interest rates in August. For around 12 months, Selic remained at around 13.75% per year. This was the second reduction of 0.50 percentage points promoted by the BC. Experts interviewed by g1 justified that the cuts occurred due to a slight deceleration in core inflation in the Broad National Consumer Price Index (IPCA). The calculation captures the price trend of various products in the country, disregarding temporary or seasonal shocks. The IPCA rose 0.23% in August, according to the latest data from the Brazilian Institute of Geography and Statistics (IBGE). As a result, the country now has accumulated inflation of 4.61% in the 12-month window. (see below) Although the IPCA has risen again in recent months, the movement was already expected by the market. The tendency, therefore, is for the BC to continue cutting interest rates if the price trajectory remains under control. The expectation of Nicolas Borsoi, chief economist at Nova Futura Investimentos, for example, is that the BC may accelerate the pace of cuts in the next Copom meetings, moving to reductions of 0.75 percentage points. Nominal interest Considering nominal interest (without taking into account inflation), the Brazilian rate fell from fourth to sixth position. Argentina: 118% Turkey: 25% Hungary: 14% Colombia: 13.25% Russia: 13% Brazil: 12.75% Mexico: 11.25% Chile: 9.50% South Africa: 8.25% Czech Republic : 7% Philippines: 6.25% Poland: 6% Indonesia: 5.75% Hong Kong: 5.75% United States: 5.50% United Kingdom: 5.50% India: 5.40% Canada: 5% Israel: 4.75% Germany: 4.50% Austria: 4.50% Spain: 4.50% Greece: 4.50% Netherlands: 4.50% Portugal: 4.50% Sweden: 4.50% Belgium: 4.50% France: 4.50% Italy: 4.50% China: 4.35% Australia: 4.10% Singapore: 3.81% South Korea: 3.50% Denmark: 3.35% Malaysia: 3% Thailand: 2.49% Taiwan: 1.88% New Zealand: 0% Japan: -0.10% Switzerland: -0.75%

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