Brazil’s average interest stands at 31.4% per annum in July
Brazil’s average interest rates remained virtually stable in July this year. The average interest rate for all loans – unsecured and secured, for households or businesses – reached 31.4 percent per annum last month, down 0.2 percentage points (p.p.). Even so, the rate is at a higher level, with an increase of 3.6 p.p. in 12 months, as per the figures released Wednesday (Aug. 27) by the Central Bank.
As expected, the rise in bank interest rates follows the cycle of hikes in the economy’s benchmark interest rate, the Selic, set at 15 percent per year by the Central Bank’s Monetary Policy Committee (Copom). The Selic is the main instrument used by the Central Bank to curb inflation.
The Central Bank justifies keeping interest rates high with the need to cool demand and contain inflation, as higher interest rates make credit more expensive and encourage savings, causing people to consume less and prices to fall. The next Copom meeting to set the Selic rate will be in September, and the rate is expected to remain at 15 percent per year, at least until the end of 2025.
Similarly, statistics show that the bank spread remained relatively stable during the month. It measures the difference between the cost of funding for banks and the average rates charged to customers, and stood at 20.3 p.p. – down 0.2 p.p. for the month and up 1.7 p.p. over 12 months.
Operation balances
In July, credit concessions reached BRL 644.1 billion. They declined 0.3 percent during the month, with a two percent reduction in operations with legal entities and a 2.5 percent expansion with households. In 12 months, nominal concessions grew 12.3 percent, with increases of nine percent in operations with companies and 15.9 percent with individuals.
As a result, the stock of all loans granted by banks in the National Financial System (SFN) stood at BRL 6.715 trillion, up 0.4 percent from June. This result was mainly due to a 0.6 percent increase in credit to households, totaling BRL 4.173 trillion, offset in part by a 0.1 percent contraction in credit to companies, which totaled BRL 2.542 trillion.
