Entities of the productive sector and trade union centrals criticize high interest rates

In a note, the National Confederation of Industry (CNI) classified Copom’s decision as “wrong”. According to the entity, the Selic, which is at its highest level since January 2017, is causing official inflation by the Extended National Consumer Price Index (IPCA) to slow down sharply, but it is above what is necessary and poses risks to production and consumption.

“We hope that, with the continuation of the deceleration of inflation, the Copom will start the much needed process of reducing the Selic rate at the next meeting”, said, in the communiqué, the president of the CNI, Robson Braga de Andrade.

According to the CNI, between the Copom meeting on May 2 and 3 and this Wednesday’s meeting (June 21), the real interest rate – which disregards the effects of expected inflation – rose from 8.1% per year to 9.2% per year. As a result, the real interest rate is 5.2 percentage points above the neutral real interest rate, which neither stimulates nor discourages economic activity. The entity also recalled that industrial production fell in three of the first four months of this year.

The Federation of Industries of Rio de Janeiro (Firjan) also considered the Copom decision inadequate. The federation assesses that the recent relief in current prices and the continued reduction of inflationary expectations for 2023 and 2024 are factors that indicate that there would be room for a retreat in the Selic. “Additionally, the domestic scenario has contributed to the reduction of the perception of country risk. This is positively reflected in the exchange rate, which continues to strengthen against the dollar, favoring the disinflationary context”.

Firjan reinforces that “internal challenges multiply. Short-term activity indicators already point to a drop in economic activity at the beginning of this second quarter. In this scenario, the recovery of confidence in the productive sector requires a more moderate monetary policy, the approval of the new fiscal framework and the subsequent commitment to the new rules, aiming to guarantee the sustainability of the public debt”. In addition, structural changes are needed, such as tax reform, to ensure a solid recovery of economic growth, promoting the generation of jobs and income for the population.

The union centrals also criticized the maintenance of the Selic. In a note, the Central Única dos Trabalhadores (CUT) recalled that high interest rates make credit more expensive for individuals and companies, which are at the highest levels in recent years. On Tuesday (20), several workers’ organizations protested in front of the Central Bank against high interest rates.

“We are all losing. The country is losing with the Central Bank keeping the country with a Selic at such a high level, which influences the entire financial system, including the banks, and causes abusive interest rates to be practiced, the highest in the world”, he highlighted in the communiqué the president of the National Confederation of Financial Workers (Contraf-CUT) and vice-president of CUT, Juvandia Moreira.

Força Sindical also considered the delay in the beginning of the fall in the Selic Rate to be an error, at a time when inflation is clearly falling. “As said, inflation has shown a downward trend, with a reduction for the third consecutive month in the price index, and the expectation is that deflations will begin to be registered”, highlighted the entity. “Given this whole context, it is reinforced that the Copom’s decision is wrong and harmful for the current economic moment”, he pointed out.