High Selic in 2023 becomes a concrete possibility, says Schwartsman

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n an event this Wednesday (23), Alexandre Schwartsman, former director of the international area at the Central Bank and specialist at CNN Brazil spoke of how economic and inflationary activity changed the national scenario, which was expected to drop interest rates in the second half of 2023.

He explained how the discussions and lack of definitions about the PEC of the Explosion impact on fiscal policies. According to him, the drop in interest rates that was expected has changed due to the latest fiscal developments. “In contrast to the monetary brake, a fiscal accelerator of great proportions is coming. The risk that the Central Bank persists for a longer period at current rates, or raises interest rates, becomes a concrete possibility”, he says.

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Brazil made a considerable monetary tightening, recalled Schwartsman. “We left negative real interest rates at the beginning of 2021 to positive rates, in an attempt to bring inflation back to the target”.

The economist said that analysts were expecting an improvement in interest rates in the first half of 2023 below 14% and, in the second half, around 12.5%.

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According to Schwartsman, the market consensus on the projected increase in GDP for 2022 is around 2.5% to 3%, which is higher than expected. However, these optimistic forecasts are accompanied by a downward revision of expected growth for 2023.

“This review does not happen by chance, as it is closely linked to the development of inflation in Brazil”.

Schwartsman shows that Brazil had an inflation that exceeded 12%, but had a quick turnaround. However, this drop is the result of the reduction of ICMS, causing a drop in fuel and energy prices.

“When you look at inflation measures that are less subject to this type of manipulation, it is still high and the drop seen in recent months is not followed in the same proportion”, he explains.

Source: CNN Brasil

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