The Monetary Policy Committee (Copom) of the Central Bank of Brazil announced, at its last meeting, a new increase in the Selic rate, raising it from 11.25% to 12.25% per year. This decision, taken amid a scenario of persistent inflation in the country, has significant implications for the Brazilian economy and for the lives of citizens.
The Current Economic Scenario
Inflation in Brazil has remained below the target set by the Central Bank, which has been one of the main factors that influenced Copom's decision to raise the Selic rate. Despite efforts to contain price increases, accumulated inflation over the last 12 months reached 5.9%, above the target ceiling of 4.75%.
This scenario of high inflation has directly impacted the population's purchasing power, with the increase in the price of essential goods and services. In addition, high interest rates also affect the cost of loans and financing, making access to credit more difficult and limiting investments.
The Increase in the Selic Rate
Copom's decision to raise the Selic rate by 1 percentage point, from 11.25% to 12.25% per year, is a measure adopted to try to contain inflation and bring it closer to the established target. This is the biggest increase in the rate since February 2022, when Copom also increased the Selic rate by 1 percentage point.
According to the Central Bank's statement, Copom foresees new increases in the Selic rate by 1 percentage point in the next two meetings, in January and March 2024. This signaling of a more restrictive monetary policy aims to reduce inflation and anchor inflationary expectations.
Impacts of the Increase in the Selic Rate
The increase in the Selic rate has several impacts on the economy and the lives of Brazilians. Some of the main effects are:
More expensive credit
With the increase in the Selic rate, the interest charged on loans, financing and credit cards tends to rise, increasing the cost of credit for families and companies.
Less attractive investments
Fixed income investments, such as government bonds and savings, become more attractive with the rise in the Selic rate, which may discourage other types of investments, such as shares and real estate.
Reduced consumption
Rising interest rates tend to reduce household consumption, as the cost of financing and loans becomes higher, limiting purchasing power.
Economic slowdown
In a scenario of higher interest rates, it is common to observe a slowdown in economic growth, with negative impacts on companies, jobs and income.
Perspectives and Recommendations
Given this scenario of rising Selic rates, it is important that Brazilians pay attention to their personal finances and seek strategies to protect themselves from the impacts of rising interest rates.
Some important recommendations are:
Renegotiate debts
Taking advantage of the opportunity to renegotiate debts, seeking better payment conditions and longer terms, can be an alternative to reduce the impact of high interest rates.
Prioritize fixed income investments
With the Selic rate on the rise, fixed income investments, such as government bonds and savings, become more attractive and can be a good option for protecting your assets.
Reduce consumption
Adopting more conscious consumption habits and reducing unnecessary expenses can help mitigate the effects of high interest rates on the family budget.
Follow Copom projections
Paying attention to upcoming Copom decisions and inflation and interest rate projections can help you anticipate and better prepare for changes in the economic scenario.
In short, the increase in the Selic rate to 12.25% per year is a measure adopted by the Central Bank to try to contain inflation in Brazil. This decision, however, has several impacts on the economy and on the lives of citizens, requiring attention and adaptation strategies. Closely monitoring projections and taking measures to protect personal finances are essential at this time.
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