Union centrals protest in SP against high interest rates

Union centrals promoted this Tuesday (20) a protest in front of the Central Bank (BC) building, on Avenida Paulista, in the central region of the capital, asking for a reduction in the basic interest rate. The group took flags and a sound car, occupying the sidewalk in front of the building. A cordon of military police prevented the approach of the demonstrators to the entrance of the building.

According to the general secretary of Força Sindical, João Carlos Gonçalves, the current basic interest rate, of 13.75% per year, reduces the supply of jobs, by making incentives in the financial market more interesting than in production. “The worker is harmed in two matters, in my opinion: in employment, because with the high interest rate there is no investment in production, so he is unemployed. With high interest rates, he cannot buy”, he said, commenting that more expensive credit also reduces the purchasing power of the population.

For the trade unionist, there needs to be a balance between maintaining economic activity and controlling inflation. “Too much rigidity in terms of inflation, you also end up taking the country into a recession. So it is essential that technicians understand what moment we are going through, ”he added.

O Central Bank Monetary Policy Committee starts this Tuesday (20), in Brasília, the fourth meeting of the year to define the basic interest rate, the Selic. The perspective, indicated in the minutes of the last meeting, in May, is that there will be no cuts in interest rates. This Wednesday (21), at the end of the day, the committee will announce the decision.

Inflation

After rising at the beginning of the year, inflation expectations have fallen. according to the last Focus bulletinthe estimate for the Extended National Consumer Price Index (IPCA), which measures official inflation in the country, in 2023 increased from 5.42% to 5.12%.

In May, driven by the drop in the prices of fuel and household items, the IPCA fell to 0.23%, according to the Brazilian Institute of Geography and Statistics (IBGE). With the result, the indicator accumulated a rise of 2.95% in the year and 3.94% in the last 12 months, a lower percentage than the 4.18% accumulated up to the previous month.

Basic interest rate

The basic interest rate is used in the negotiation of public securities issued by the National Treasury in the Special System for Liquidation and Custody (Selic) and serves as a reference for other rates in the economy. The rate is the main instrument of the Central Bank to keep inflation under control. The BC acts daily through open market operations – buying and selling federal public bonds – to keep the interest rate close to the value defined at the meeting.

When the Copom raises the basic interest rate, the purpose is to contain heated demand, and this affects prices because higher interest rates make credit more expensive and stimulate savings. Thus, higher rates can also make it harder for the economy to expand.

The expectation of the financial market, however, is that the Selic ends 2023 at 12.25% per year.