The Monetary Policy Committee (Copom) announced a 1% increase in the Selic rate, which went from 5.25% to 6.25% points, the highest level since July 2019. It is the fifth time that the rate has increased in 2021.
The Copom released a statement saying that they do not expect another increase at this level. The next meeting to define the new Selic Rate will take place at the end of October.
The committee also released the minutes of the meeting, which informed that the increase could be greater than 1 point, but reached the decision that the increase was adequate to ensure the convergence of inflation to the target stipulated by the CMN (the Brazilian National Monetary Council) in 2022, which is 3.50%.
According to a survey performed by the Brazilian Central Bank, which had the participation of more than one hundred financial institutions, market analysts project that the interest rate will keep being increased and may reach up to 8.25% at the end of the year.
In August, the rate also increased by 1%, when it went from 4.25 to 5.25%. At the time, the reason for the increase was to make credit more expensive and encourage savings accounts.
The Selic, or basic interest rate, is used by public and private banks to calculate interest rates. One of the purposes of the rate is to regulate inflation. The Copom operates with the Selic rate according to the country’s economic expectations and to how the government can work to reach a financial balance.
Written by Marcos Ferreira, content assistant at Drummond Advisors