Brazil Central Bank Cuts Interest Rate; Consumer Doesn't Benefit

02/23/2017 - 11h56

With forecasts for inflation coming in at less than 4,5% in 2017, the Brazilian Central Bank (BC) announced another cut in the basic interest rate, the Selic, from 13% to 12,25% per year.

The Selic rate serve as a reference point for interest rates that are charged by commercial banks. Last month, the BC had already made a rate cut of 0,75 points, and the institution signaled that the lowering of the Selic should intensify in the next months.

Analysts believe that progress on the government's economic agenda in the Congress should influence the process.

Any additional reduction in the Selic, however, shouldn't cause immediate effects for the consumer. As they did in January, banks are once again promising lower rates in their primary lines of credit but data from the BC reveals that, on average, rates continue to rise.

According to specialists, the weak economy and bad debts are the reasons that the banks aren't passing along the full decrease in the Selic.

Last year, banks set aside higher reserves from their revenues for eventual consumer defaults.

Translated by LLOYD HARDER

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