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Brazil raises interest rates to 13.75% in the twelfth increase to contain inflation


The Central Bank is weighing a new rise at its next meeting, on the eve of the elections and at a time when the economy is the main concern among voters

A customer buys meat at a street market in Rio de Janeiro last April.Maria Magdalena Arrellaga (Bloomberg)

Brazil continues with its aggressive policy to curb the rise in prices, which is slowing down even though inflation remains high.

The Central Bank has increased this Wednesday half a percentage point, up to 13.75%, interest rates.

It represents the twelfth consecutive increase approved after the coronavirus pandemic in what is already the toughest monetary policy cycle in the world against inflation, which corrodes the purchasing power, above all, of the legions of poor people.

The rise in prices in the first Latin American economic power reaches 11.89%, unprecedented levels in two decades.

The Central Bank of Brazil has explained in a statement that the increase, which places rates at the 2017 level, is due to the fact that "the external environment continues to be adverse and volatile" and that "consumer inflation continues to be high".

This cycle of hikes began at the end of 2020, when rates were at 2%, the historical low.

The Central Bank's monetary policy committee adds that "it will assess the need for a residual adjustment, of a lesser magnitude, at its next meeting."

That is to say, that it weighs a new increase of 0.25% in the meeting of September 21, at the gates of the first round of the general elections.

The economy is the main concern of Brazilians, who in October will elect a president, in addition to the two chambers of Congress, the state chambers and the governors.

Close elections are expected in a polarized and tense environment.

President Jair Bolsonaro is running for re-election against his predecessor Luiz Inácio Lula da Silva, who leads the polls with a comfortable lead that is shrinking.

The far-rightist is managing to reduce the distance thanks to the mega package of 7,500 million dollars in social aid that the president has managed to push through Congress.

Inflation and the economic crisis, which have triggered hunger and poverty, are Bolsonaro's main burden in the electoral race, although his mismanagement of the pandemic and his attacks on other institutions also deepen the lack of support reflected by the surveys.

Unemployment, standing at 9.3%, has been declining steadily over the last year, in which it has fallen five points, but simultaneously the number of informal jobs is very high, it represents 40%, that is, there are almost 40 million of Brazilians.

It is estimated that 33 million people are hungry.

Analysts and the market were already betting that the rise would be half a point.

The Brazilian monetary authorities have spent months deploying abundant artillery to curb inflation.

Brazil, which buried hyperinflation in the 1990s, returns to the nightmare of seeing prices rise in the blink of an eye, although by no means reaching the pace of those years.

The biggest rises affect fuel and food.

Supermarkets have reduced the range of products they offer to focus on those with the best sales among customers.

And commenting on how much this or that product has increased has become one of the topics of daily conversation.

The inflation target established by the Central Bank for this 2022 was 3.50% with a range of one and a half points above or below.

But, as in the rest of the planet, the combination of the effects of the pandemic, the war in Ukraine, the slowdown in the Chinese economy and the recession in the United States has pulverized any forecast.

Now, analysts estimate that by the end of the year it will be around 8.5%, which is below the 10.06% registered in 2021, but well above recent years.

The fear that the Brazilian president will not concede a narrow defeat against the leader of the Workers' Party is a nightmare scenario for investors as well, as one of them, Luis Stuhlberger, from Verde Asset, explained this morning at an economic meeting. , informs

Folha de S. Paulo


According to Stuhlberger, a 51% victory for Lula with 49% for Bolsonaro is the biggest risk for the Brazilian market at the moment.

The current president has been raising the specter of possible fraud for months while he criticizes the voting system despite the fact that no irregularity has been detected.

Electoral polls indicate that a large part of the electorate blames Bolsonaro for the poor economic situation.

For this reason, the leftist Lula has spent the entire pre-campaign recalling the bonanza that marked his mandate, thanks to the Chinese demand, which allowed him to undertake an ambitious distribution of wealth.

The PT candidate now prefers to focus on recalling those golden years of prosperity and ignoring the economic crisis and Dilma Rousseff's mistakes that led Brazil into recession.

Lula has announced that if he wins he will appoint an economy minister who is a politician with technical knowledge, but not a technocrat.

Lula wants someone capable of negotiating with Congress in order to have more room for manoeuvre.

Rising rates and inflation weigh on the growth of the Brazilian economy, whose GDP grew 4.6% at the end of last year, offsetting the catastrophic first year of the pandemic.

For this 2002 the forecast is that the increase will be much lower, between 1.2% and 1.5%.

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Source: elparis

All business articles on 2022-08-04

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