Base interest should reach 15% by 2025, the highest level since 2006; will fall to 12.75% in 2027
The basic interest rate, Selic, completed 3 years Above 2 digits (10% per year) in February. The median of the projections of financial agents indicates that the base interest this year and will fall to 12.75% in 2027.
Selic should be at least 2 years in this situation, which will total 5 years above 2 digits. Analyst estimates point out that it will be Selic’s 2nd largest period above 10% in the 21st century.
The base interest is on the rise. 1 percentage point on Wednesday (29.jan.2025), to 13.25% per year, at the last meeting. It was the 4th consecutive readjustment at Selic. Copom has already said it will go to the next March.
The last time the interest was below 10% was in, the month that the (Central Bank) increased by 9.25% to 10.75%.
Read in the infographic below the projections for the next meetings:
Without economic challenge
The years of monetary tightening also coincide with a positive performance of economic activity. Brazil’s GDP (Gross Domestic Product) grew 3% by 2022, 3.2% by 2023 and should have grown 3.5% by 2024, according to financial market projections.
Credit stock rose 14.5% by 2022, 8.1% by 2023 and 10.9% in 2024.
The job market became warmer. The unemployment rate fell annually from 2022 to 2024, the occupation the annual record.
Economists expect a slowdown in economic activity in 2025, but the economy demonstrates resilience. Inflation follows outside the allowed range of the goal. Copom should keep the high interest trajectory.
The Central Bank said in the quarterly inflation report released in December 2024 that Brazil’s neutral interest rate is 5%. The variable is “Subject to high uncertainty in its measurement”according to the text. It means that when real interest is above this level, there is a contractionist monetary policy.
In December, Brazil to have the 2nd largest real interest in the world, at 9.48%, according to projection of. It was only behind Russia.
What analysts say
Ecio Costa, economist and professor at (Federal University of Pernambuco), said that in Brazil and in emerging countries the interest rate level “It will never be close to what is practiced in advanced economies, especially the United States and the euro zone”.
The economist stated that emerging nations pose more risks than those developed. For him, there is a greater alternation of economic policies and more risks regarding the organization of institutions in developing countries.
“These threats end up being priced in higher interest rates, as well as the lack of credibility of institutions and the financial system. This is historical ”he said. Costa argued that the high level of interest in the last 3 years has relationship with the US economy.
“The interest rate there also comes at a high level in the last 3 years in order to combat American inflation. In Brazil, it cannot have a very low interest rate compared to the interest rate practiced there ”said the teacher.
He stated that if the US and Brazil rate differential were higher, with a higher drop in Brazilian interest rates, there will be a pressure on foreign investor escape. The reason is the lack of attractiveness of contributing resources in Brazil while there is high and safe remuneration in the US, which is safer to invest.
Costa stated that annual growth above 3% in 2023 and 2024 was very pulled by the fiscal impulse. He said the impact of social programs used on Covid-19 pandemic boosted the economy by 2020, 2021 and 2022.
“In 2023, there was more than R $ 200 billion of tax deficit. In 2024, more tax deficit. This has been driving the economy a lot ”he declared.
The economist compared with the scenario of expectations of future interest in 2016 and 2017.When you had the approval of the fiscal ceiling of [Michel] Temer, who had a scheduled fiscal target that should be met and expenses could only follow in accordance with inflation, future interest with a few months collapsed. So, the short term could also fall ”these.
Another reason for heated economic activity is the most modernized service sector because of Covid’s pandemic. With social isolation, technology has taken part of the service space.
Costa argued that the Government (PL) has enhanced free credit, which is the negotiated in the market, to the detriment of loans with targeted resources – which are subsidized and may have a fiscal impact.
“The effect of Selic over 10% or the high Selic is mitigated by the direction of directed credit. The more targeted credit you have the power of Selic the higher it is inhibited, because it has directed credit the lower ”defended the economist.
About the strong job market, he said the unemployment rate has fallen because social programs have made many families not seek work.
“This is something problematic in the Brazilian economy. Has several sectors that complain of lack of labor, such as construction […] Workers prefer to receive the social program and do nozzles ”these.
Claudio Pires, managing partner of, said much for strong economic activity is the fiscal impulse and expansion of public spending. He stated that the interest rate is very high and should reach levels greater than 15% by 2025.
“The Central Bank needs to raise interest rates to the very restrictive level because the government, on the other hand, is accelerating spending and most of these expenses is not related to investment or something that in the medium term translates into increased supply capacity of the economy ”defended Pires.
The economist also said that the growth of public expenses is related to the transfer of income with high consumption propensity, which presses inflation.
“Another question is that we had a strong devaluation of currency last year (the Real lost 28% against the dollar). This also pressures inflation and then the Central Bank also needs to combat the effects of the devaluation of the real“, These.
