Xinhua News Agency, Brasilia, September 22 (International Observation) Brazil's central bank continues to raise interest rates and is committed to achieving the goal of "double stability"
Xinhua News Agency reporter Bian Zhuodan
Under the dual pressure of high internal inflation and the uncertain expectations of external US monetary policy, the Brazilian Central Bank announced on the 22nd that its Monetary Policy Committee had unanimously decided to raise the benchmark interest rate by 1 percentage point to 6.25%. The same range of adjustments will be made.
This rate hike is the fifth consecutive rate hike since Brazil started the current rate hike cycle in March this year.
At present, Brazil's benchmark interest rate has risen to the highest level since July 2019.
A comprehensive analysis of Brazil's economic conditions and internal and external pressures can determine that the current interest rate hike cycle has internal and external "distability" as the main goal: stabilize inflation internally, protect people's livelihood; stabilize the exchange rate externally, retain funds, and prevent financial risks.
To curb inflation and protect people's livelihood under the epidemic is one of the reasons for the Brazilian central bank to raise interest rates.
In the 12 months ending in August this year, Brazil’s official inflation rate was as high as 9.68%, far exceeding the median target of 3.75%.
At present, rising costs, supply constraints, and shifts in demand have led to the unabated momentum of rising industrial prices in Brazil. At the same time, with the gradual normalization of service sector activities, service prices have also increased sharply in recent months; in addition, affected by exchange rates, prices, and climate Under the influence of factors such as conditions, the prices of food, fuel, and electricity are also continuously facing upward pressure.
High inflation and rising prices have severely affected the daily lives of Brazilians who have already been hit by the epidemic.
Recently, a survey on the website of the Brazilian newspaper Sao Paulo showed that the food consumption structure of Brazilians has changed since the beginning of the year, and the consumption of meat, rice, bread, soft drinks, juice and other foods with higher price increases has decreased.
At the same time, Brazil's energy consumption is also facing severe challenges.
Due to the ongoing drought, Brazil is currently experiencing what its Minister of Minerals and Energy Bento Albuquerque called “the worst water crisis in 91 years”. Many reservoirs are unable to efficiently generate electricity due to insufficient water storage. Regulators have repeatedly raised electricity prices. .
At present, the Brazilian government has required all federal agencies to reduce electricity consumption by 20%, give financial rewards to enterprises that produce off-peak, and call on all sectors of society to save energy as much as possible.
Another important goal of the Central Bank of Brazil in launching this round of interest rate hike cycle is to maintain a stable exchange rate, retain capital, and prevent financial turbulence due to external factors.
The Monetary Policy Committee of the Brazilian Central Bank pointed out in a document released on the 22nd that some advanced economies’ response to their own inflation risks will make emerging economies face challenges.
In fact, the current trend of US monetary policy, and even some news and trends, have affected the nerves of the monetary authorities of many Latin American countries, including Brazil.
On the 22nd, the U.S. Federal Reserve announced that it would maintain the target range of the federal funds rate between zero and 0.25%, and said it may start to reduce the scale of asset purchases "soon".
Experts pointed out that once the Fed starts the interest rate hike cycle, or even just sends out relevant clear signals, it may cause some funds to flow back from Latin America to the United States. This will not only put greater pressure on the currency exchange rates of Latin American countries, but also may affect capital-intensive industries and even The stability of the entire financial system requires a response plan in advance.
At present, the external risks of Brazil's economy are actually still in the stage where the rain is about to come, and the impact is far from coming. Therefore, it is expected that the process of raising interest rates in the country may continue for a longer period.
In a written interview with reporters, Zhou Zhiwei, executive director of the Brazilian Research Center of the Latin American Institute of the Chinese Academy of Social Sciences, pointed out that in order to successfully cope with the challenge of internal and external uncertain risks, Brazil needs to alleviate the epidemic as soon as possible, reduce the greatest uncertainty in economic activities, increase employment opportunities, and improve Residents’ income status, appropriate stimulation of consumption, expansion of their own market, enhancement of the attraction to capital and technology, and promotion of sustainable economic development in a benign way.