Brazil has the 2nd highest real interest rate in the world (Image: REUTERS/Adriano Machado)
O Brazil rose to second place in the world ranking of real interest rates, after the Monetary Policy Committee (Copom) raise the Selic to the level of 10.75% at the last meeting — an increase of 0.25 percentage points (pp). The real interest rate is 7.33% per year, according to a survey by Portal MoneYou.
The country is only behind Russia (9.05%). Next in line are Turkey (5.47%), Mexico (5.45%) and Indonesia (4.37%).
According to projections, Brazil would remain in second place if Copom had opted for a 0.50 pp increase or maintained the 10.50% rate. In these cases, however, the country's real interest rates would be 7.63% or 7.08%, respectively.
The real rate is a combination of the inflation projected for the next 12 months, via collection of the Focus report Banco Central (BC), of 4.10% at the end of 2024, and the DI interest rate of next year in the most liquid maturity — September 2025.
In nominal terms, with the Selic rate at 10.75%, Brazilian interest rates are tied for fourth place, with Colombia and Mexico. The country is below Turkey (50%), Argentina (40%) and Russia (19%) and above South Africa (8.25%), Hungary (6.75%) and India (6.50%).
Why did Copom raise the Selic rate to 10.75%?
Copom raised the basic interest rate by 0.25 pp, indicating a risk to inflation. The directors highlighted, in the statement, that there is an upward asymmetry in the balance of risks for the prospective scenarios for the Broad National Consumer Price Index (IPCA).
“The scenario, marked by resilience in activity, pressures in the labor market, a positive output gap, rising inflation projections and unanchored expectations, demands a more contractionary monetary policy,” they say.
The decision was in line with market expectations, which were already expecting a return to monetary tightening, after the more relaxed tone hawkish of the directors in the latest communications.
See the world ranking of real interest rates
| Ranking | Country | Current interest rates discounted for inflation for 12 months (ex-ante) |
|---|---|---|
| 1 | Russia | 9,05% |
| 2 | Brazil | 7,33% |
| 3 | Türkiye | 5,47% |
| 4 | Mexico | 5,45% |
| 5 | Indonesia | 4,37% |
| 6 | India | 3,08% |
| 7 | South Africa | 2,96% |
| 8 | Colombia | 2,37% |
| 9 | Thailand | 2,03% |
| 10 | Hungary | 1,98% |