The Copom (Monetary Policy Committee) of the central bank raised the Selic rate by 7 pp (percentage point) this Wednesday (0,5): from 14,25% to 14,75% per year. This is the sixth consecutive increase in the basic interest rate, which reaches the highest level recorded since August 2006.
Since September last year, the Selic rate has been gradually adjusted to contain inflation. According to the Central Bank, there are signs of moderation in economic growth, but the short-term inflationary scenario remains adverse.
The latest Focus bulletin, for example, shows that the estimate for the IPCA (Broad National Consumer Price Index) – considered the country's official inflation – is 5,53% in 2025.
This represents inflation above the ceiling of the continuous target established by the CMN (National Monetary Council) – which is 3%, and can reach a maximum of 4,5% due to the tolerance interval of 1,5 points.
Selic rate
The basic interest rate is used in negotiations of public bonds and serves as a reference for other rates in the economy. It is the Central Bank's main instrument for keeping inflation under control.
When inflation is low, Copom reduces the interest rate to stimulate consumption and stimulate the economy. On the other hand, when it is high, the agency raises the Selic rate to restrict consumption and reduce pressure on prices, such as food, fuel and energy.
The Central Bank only considers reducing the interest rate when it is certain that prices are under control and the risks of high inflation are eliminated, which is not the current case.
As a rule, a significant increase in interest rates is detrimental to the economic activity and development of any country, even though it is a necessary measure to control inflation. From the investors' point of view, it serves as a parameter to assess the viability of their investments.
In the solar energy sector, higher interest rates tend to make investors opt for lower-risk investments – which could end up reducing the appetite for long-term projects, such as solar energy, as the cost of capital rises and financing becomes more expensive.
Copom Meetings
Copom is the body of the Central Bank that meets every 45 days to define the level of the Selic rate. The objective is to ensure that the country's monetary policy achieves its objectives efficiently.
Once the basic interest rate has been defined, the Central Bank acts daily through open market operations, buying and selling federal public bonds, to keep interest rates close to the value defined at the meeting and prevent inflation from getting out of control.
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An answer
The government increases taxes, spends as if there were no tomorrow and blows the public s.
What is the result? Inflation.
It's simple. If the same thing is done, you can't expect different results.
And the remedy applied only punishes the population, reducing economic activity and increasing unemployment.
And our congress is only concerned with its amendments and the executive branch with increasing public spending.
It's sad to see that not even during Dilma's recession did we have such high interest rates.