Copom increases the basic interest rate from 3.5% to 4.25% per year

The Monetary Policy Committee (Copom) announced, on Wednesday the 16th, an increase to the Selic rate of 0.75%, with a jump from 3.5 to 4.25 percentage points. The increase aims to contain inflationary pressure, which grew for the third consecutive time since March.

The decision to increase basic interest rates was already anticipated by the financial market, according to a survey carried out by the Central Bank (BC), which later confirmed the 0.75 percentage point increase.

The Selic, or basic interest rate, is used by public and private banks to calculate interest rates. One of the objectives of the rate is to regulate inflation. Copom works with Selic according to the country’s economic expectations and how the government can act to achieve a financial balance.

Factors such as an increase in commodity prices (products of agricultural origin or mineral extraction, produced on a large scale and destined for the foreign market), added to the rise in fuel prices, the water crisis and the value of the dollar, all of which ended up raising inflation in recent months, contributing to the increase in the Selic.

According to the Central Bank, Brazilian economic activity continues to show a more positive development than what had been expected, especially in the face of the intensity of the second wave of the coronavirus pandemic. The BC also informed that the next Copom meeting, scheduled for August 3rd and 4th, signaled a continuation of the monetary regularization process with another adjustment of the same magnitude, that is, the Selic may undergo a new increase.

For next year, the BC’s financial market predicts that the Selic rate will remain at 3.78% p.a.

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