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Already a World Champion of High Interest Rates Brazil Ups Key Rate to 11.25%

Brazil's key interest rate, the Selic Brazil’s National Industrial Confederation (CNI) called the decision to raise the country’s key interest rate, the Selic, from 10.75% to 11.25% “precipitated,” adding that, in the long term, “The increase will be detrimental to economic growth.”

In a note, the CNI said the Monetary Policy Committee (Copom) could have waited for credit restrictions announced last month to take effect before adjusting the Selic. According to the CNI, the Copom took the easy way out.

“Higher interest rates will only hamper the productive sector. There will be a negative impact on activity and employment,” said the note from the CNI, which went on to explain that a profound fiscal adjustment is the right way to control inflation and demand.

“Fiscal measures reduce market uncertainty and create positive expectations that inflation will be controlled without the need for a new cycle of higher interest rates,” concluded the note.

The São Paulo Industrial Federation (Fiesp) also blasted the decision by the Central Bank’s Monetary Policy Committee (“Copom”) to raise the country’s benchmark interest, calling it “an error.”

ABr

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