The head of the Presidential Civilian Advisory Staff, Minister José Dirceu, criticized some people’s concern over inflationary pressures. “Many people think that there is no inflationary pressure in Brazil, that there is no need to raise interest rates. I myself expected that interest rates would be down to 13% in December.
“With the country growing again, I was even more convinced of this. When we look at the inflationary pressures, which come from government-regulated prices and food prices, which are subject to oscillations, I don’t see where there is inflationary pressure capable of jeopardizing control of inflation in the country,” he affirmed.
Dirceu also called for an alliance between the masses and entrepreneurs to maintain economic growth. In his view, the country has some growth problems “that are not resolved solely by the government, the Parliament, or the party; it is necessary for all of society to participate,” he concluded.
In its August 18 meeting Brazil’s Central Bank’s Monetary Policy Committee (Copom) decided to maintain the annualized benchmark interest rate (Selic) at 16%.
This was the fourth straight time this year that members of the committee have voted to keep the Selic unchanged at 16%. This time the vote was unanimous, based on their evalutation of the outlook for trends in inflation.
The Selic is the interest rate the government pledges to pay when it borrows money on the domestic market. The rate is determined each month by the Copom.
In calculating the Selic, the Copom takes into account various factors, among them, future inflation prospects (the next 30 days) and momentary rising or falling price tendencies in the economy (past inflation).
International economic conditions are also considered. Whether there is a glut or scarcity of money on the international market (international liquidity).
Also, whether there is a lot of money in circulation on the domestic market or not and the financial requirements of government accounts (how much cash the government has available to pay its debts).