High interest rate should generate recession in the second half, says economist

O central bank started in March 2021 a cycle of hikes in the basic interest rate, the Selicwhich continued this month, and the trend is that high interest rates, expected to reach at least 12.75%, will lead the economy into a recession in the second half, according to the chief economist at AC Pastore e Associados, Paula Magellan.

In an interview with CNN on Wednesday (30), she stated that “an interest rate of this size is very high, and we believe that a recession for the second semester is very difficult to avoid”.

In this sense, one of the effects of this situation is the repercussion in the labor market, which according to Magalhães must have some kind of deceleration, or even a contraction, with an increase in the unemployment at the end of 2022.

“What we see in the confidence of entrepreneurs is that they are unwilling to open jobs, but they are more positive than consumers. We see a certain caution when talking about expectations, they are observing these interest rates also increasing, and the question remains as to how they will react. Our expectation is that this reaction will be negative”, he says.

At the same time, it assesses that the data from the General Register of Employed and Unemployed (caged) in February shows “some effect this year from the addition of education jobs, which last year were still not coming back as much as this year”.

The economist says, however, that the Omicron variant apparently had a smaller effect on the economy than previous waves of Covid-19.

“It is a job market that continues to recover, even in the area of ​​services, there is a little difference in the data from Caged and Pnad, but both show that the service sector is recovering, albeit slowly. It may be that Ômicron interrupted this recovery a little there in February, but as it was not a wave that had many hospitalizations and deaths compared to the previous ones”.

Source: CNN Brasil

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