Analysis: Brazil halts interest rate hikes, while the world continues; what is magic? | Economy

Just taking a look at it from this viewpoint, Brazil’s financial system is doing effectively, thanks – at the least in comparison with different main economies, as the euro zone elevated the interest charges at the starting of the month to attempt to management inflation. pay.

  • US interest charges will rise for the fifth time this yr; The rate was the highest since 2008

What is Brazilian magic? The reply, partially, is linked to a nationwide downside: hyperinflation.

At the starting of 2021 – from the mixture of the inflation of the greenback, the appreciation of oil in the world and the drought – the inflation of Brazil started, the BC didn’t wait and see: the march started Selic’s first since 2016. , regardless of low financial development and unemployment round 15%.

Meanwhile, the remainder of the world – nonetheless affected by the disaster brought on by the Covid-19 pandemic – will proceed to carry on and see rising costs, sustaining low interest charges and stimulus coverage shouldn’t change.

Until the conflict in Ukraine, the scenario modified in the first half of this yr, and attributable to the value of gasoline (Russia is the major producer) and meals costs (which have broken the difficulties of exporting Ukraine, a grain producer giant), will improve.

Whoever begins the run first, crosses the end line. At least till I begin working once more. Brazil’s inflation (regardless of two month-to-month adverse charges) is nonetheless underneath management and its fall is closely supported by gasoline tax cuts and decrease worldwide oil costs.

This is why the BC’s assertion on holding the rate this Wednesday was clear: if inflation will get too heavy, the Selic will go up once more.

“The Committee emphasizes that it is doable to alter facets of financial coverage in the future and won’t hesitate to renew the adjustment cycle if the rate discount course of doesn’t proceed as anticipated. “, says the article. A clearer assertion is unattainable.

In the United States, nevertheless, there is little doubt: it is going to rise once more and be robust. And it could be the identical in Europe, which is extra depending on Russian vitality and Ukrainian grain than the remainder of the world.

And right here, though it has stopped rising, the interest rate – as a result of it is the highest in the world in actual phrases – won’t fall once more anytime quickly. The market is predicting interest charges at 13.75% by the finish of the yr, barely reducing to 11.25% by the finish of 2023.

Interest charges are taking a very long time to carry, the financial system is nonetheless robust, jobs are wholesome, incomes are low, and debt is excessive.

Brazil began taking the drug earlier, and the dose was bitter – and even then, it needed to be repeated.

See the charts beneath for interest charges in Brazil and the US:

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