Maintaining high interest rates could prevent an improvement in the economy, say entities

HIGH INTEREST

Central Bank kept Selic at 13.75% per annum and frustrated expectations of signaling a rate cut in August

The decision of the Monetary Policy Committee (Copom) of the Central Bank (BC) to maintain the basic interest rate at 13.75% per year caused a series of criticisms from entities representing the Brazilian productive sectors. The information is from the CNN website.

Organ representatives said they were surprised by the decision and stated that interest rates at the current level prevent an improvement in economic conditions, reflecting on the generation of jobs in the country and on the pace of activities.

The president of the Institute for Retail Development (IDV), Jorge Gonçalves Filho, said that Copom’s decision left the sector upset, frustrating expectations of an immediate cut.

“We hope there will be a reduction at the next meeting, given that the points that make the reduction difficult mentioned in the Copom minutes are being addressed. There has to be this reduction, because the economy is working at a very low level and this does not generate jobs, optimism, those who are capitalized do not invest”,

stated.

It didn’t happen now, but we understand that it will hardly be able to go beyond August. If the established rate drops, but remains high, we need to work on the financial system so that it offers better credit conditions”, he added.

For the Brazilian Chamber of Construction Industry (CBIC), it was time for the Copom to reduce the Selic rate “at risk of recession soon”.

According to the entity, there was a 30% drop in launches in the first quarter of this year, partly caused by high interest rates.

“The economy’s basic rate is clearly affecting productive activity. In the case of construction, comparing the first quarter of 2023 with the same period last year, we had a 30.2% drop in launches, showing that our entrepreneur fears the future. We see a scenario with reduced inflationary pressure, improved expectations, approval of the fiscal framework by the Chamber of Deputies”,

said the CBIC, in a note.

For the National Confederation of Industry (CNI), maintaining the Selic is above what is necessary to combat inflation and poses additional risks to economic activity.

“We hope that, with the continuity of the deceleration of inflation, the Copom will start the much needed process of reducing the Selic rate at the next meeting”, says the president of the CNI, Robson Braga de Andrade. According to the entity, the recent data indicating the loss of breath of inflation reinforce the thesis that the Central Bank is exaggerating in the monetary policy.

When contacted, Febraban, the entity that represents the largest Brazilian banks, declined to comment on Copom’s decision.

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