Haddad says that high interest rates led to the negative preview of GDP in May: ‘deceleration came hard’

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Minister once again criticized the Central Bank, which has maintained the Selic rate at 13.75% since 2022; government pushes for reduction. IBC-Br, measured by the BC, indicated a 2% decline in the economy in May. The Minister of Finance, Fernando Haddad, said this Monday (17th) that the 2% drop in economic activity in May, measured by the Central Bank’s Economic Activity Index (IBC-Br), was already foreseen. The IBR-Br is considered the “preview” of the Gross Domestic Product (GDP) and indicates the evolution of the Brazilian economy, month by month. For Haddad, the negative result is a reflection of the maintenance of high interest rates in the country. “The intended deceleration of the economy by the Central Bank came hard. We need to be very careful with what can happen if rates are maintained at around 10% real interest per year. It is very heavy for the economy,” he said. The 2% drop in the Brazilian economy in May was the biggest drop recorded by the IBC-Br since March 2021 – when the economy retreated 3.6%. The BC discloses only the data, without indicating motivations or analyzing the index. In April 2023, the GDP preview had indicated a growth of 0.56% in the economy. The index is one of the tools used by BC to define the Selic. With the economy growing less, there would be less inflation. Selic: expected decline In June, the BC maintained the Selic at 13.75% per annum — a level in effect since August 2022. The BC’s Monetary Policy Committee, composed of the president and the institution’s board of directors, meets beginning of August to define the basic interest rate. The expectation is that the Selic rate will be reduced. There are two factors that favor this change: a nod in favor of the reduction in the minutes of the last Copom meeting, in June; and the inauguration of two Central Bank directors appointed by the current government: the career official Ailton Aquino and the former secretary of the Ministry of Finance, Gabriel Galípolo.

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