Brazil once again has the highest real interest rate in the world, even after another cut; see ranking

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The country had dropped to second place in September, but recent government statements regarding the fiscal issue and lower inflation projections took the country back to the top of the podium; withdrawal is from MoneYou. Headquarters of the Central Bank in Brasília Raphael Ribeiro/BCB Brazil once again had the highest real interest rate in the world this Wednesday (1st), even after the Monetary Policy Committee (Copom) of the Central Bank (BC) announced a new cut in the basic rate of 0.50 percentage points (pp). (understand more below) According to a survey compiled by MoneYou, the country’s real interest rates are now at 6.90%, at the top of the ranking. Next came Mexico, with a real rate of 6.89%. Real interest is formed by the country’s nominal interest rate minus the inflation forecast for the next 12 months. See below the main results from the list of 40 countries. one announced a basic interest rate of 0.50 pp. With the reduction, the Selic remained at 12.25% per year. According to MoneYou, Brazil’s return to the top of the ranking reflects the opening of future interest curves (expectations of average yields on public bonds), following recent government statements about the country’s fiscal scenario. (understand below) The lower projections for inflation complete the scenario and also help to explain Brazil’s return to 1st place. Argentina was at the opposite end of the ranking. Despite having the highest nominal rates on the list (133% per year), the country also faces hyperinflation, which ends up bringing down real rates. Third consecutive interest rate cut This Wednesday (1st), Copom announced a new cut in the basic interest rate, of 0.50 pp. With the reduction, the Selic remained at 12.25% per year. This was the third consecutive cut in the basic rate by the board, after the Selic had remained at 13.75% per year for around a year. But what explains Brazil’s return to the top of the rankings? According to MoneYou, two factors explain Brazil’s return to 1st place on the list of highest real interest rates in the world: Recent statements by the government on the fiscal issue (understand below); And the lowest inflation projections for the country. Recently, President Luiz Inácio Lula da Silva (PT) stated that the government will “hardly” reach the target of zero deficit in its accounts in 2024. Since then, the Minister of Finance, Fernando Haddad, who has defended the adoption of measures to achieving the goal has been the target of questions on the topic. The government’s political wing defends changing the target, fearing the impact of restrictions on public accounts on next year’s expenses. Zero deficit: understand how the target can be changed and what the new fiscal rule foresees In interviews with journalists this week, the minister avoided answering questions about the target of zeroing the deficit, but stated that there is “no lack of commitment” from Lula in relation to the country’s fiscal balance objective. The statements ended up increasing market uncertainty about meeting the fiscal target and, according to Moneyou, increased future interest rates — a scenario that, added to lower projections for inflation, ended up resulting in Brazil returning to the top of the ranking of highest real interest rates. of the world. Nominal interest Considering nominal interest (without discounting inflation), the Brazilian rate remained in 6th position. See below: Argentina: 133% Turkey: 35% Hungary: 13% Colombia: 13.25% Russia: 15% Brazil: 12.25% Mexico: 11.25% Chile: 9% South Africa: 8.25% Republic Czech: 7% Philippines: 6.50% Indonesia: 6% Poland: 5.75% Hong Kong: 5.75% United States: 5.50% United Kingdom: 5.25% 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: 3.82% Denmark: 3.60% South Korea: 3.50% Malaysia : 3% Thailand: 2.56% Taiwan: 1.88% New Zealand: 0% Japan: -0.10% Switzerland: -0.75%

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