A man walks in front of the Central Bank headquarters building in Brasilia, Brazil (REUTERS/Adriano Machado/File)
He Central Bank of Brazil approved the recent rise in interest rates in the country for difficulties that the Government has in balancing fiscal spending and the “uncertainty” in relation to the future of the economy in the United States, according to a document released this Tuesday.
The institution raised 0.50 percentage points the country’s basic interest rate last week and set it at 11.25% annually, its highest level since December 2023.
In a document released this Tuesday, he justified that “the increase of 0.5 percentage points appears appropriate given the economic conditions and prospective uncertaintiesand reflects the commitment to convergence of inflation with the target, essential for the continuous construction of credibility.”
On the internal level, alluded to the difficulties in balancing fiscal spendinga matter that is the subject of discussions within the Government, which has been studying a budget cut for three weeks without reaching any conclusion so far, which has generated enormous concern in the markets.
Domestically, the Central Bank alluded to the difficulties in balancing fiscal spending, an issue that is the subject of discussions within Lula’s Government (REUTERS/Adriano Machado)
Externally, the Central Bank maintained that “There remains great uncertainty about the pace of disinflation and the slowdown in economic activity.” in USA and the “doubts” regarding the commercial and monetary policies that that country will adopt after the electoral victory of Donald Trump.
The document also cites the “inflationary pressures” that this scenario can generate, both internally and externally, which is already reflected in the national economy, with the increase in prices recorded last October, which was 0.56%, the largest increase in eight months.
The October result brought year-on-year inflation to 4.42%a level that puts in check the goal set by the Central Bank for this year, which is 3%, with a tolerance margin of 1.5 points, which imposes a ceiling of 4.50%.
The gradual rise in prices in recent months forced the Central Bank, an autonomous institution, to interrupt a process of reducing rates that was promoted and defended by the President’s Government. Luiz Inácio Lula da Silvawho maintains that high interest rates hinder the growth of the economy.
A man looks for products in a supermarket in Rio de Janeiro (EFE/Antonio Lacerda)
In another order, this Monday it was known that Brazil’s fiscal deficit accumulated in the last year was reduced in September to one trillion reais (about 183 billion dollars or 172 billion euros at today’s exchange rate), equivalent to 9.34% of the gross domestic product (GDP).reported the Central Bank.
The nominal result until September represented a slight improvement compared to August, when the deficit was 9.81% of GDP and totaled 1.1 trillion reais.
Regarding the primary deficit, which precedes the payment of interest on the debt, this also decreased by 0.1 percentage points in the last 12 months up to 2.15% of GDP.
Public sector gross debt reached 78.3% of GDP in September, 0.2 percentage points less than the previous month.
The Central Bank attributed this reduction to the variation in nominal GDP, the exchange rate appreciation and the evolution of interest rates.
(With information from EFE)
