Brasil

January 31st , 2025

REGRESA

1. Copom raises Selic rate to 13.75% p.a.

The Central Bank has decided to raise the basic interest rate to 13.75% per year. According to the Brazilian monetary authority, the international scenario remains unstable, with U.S. economic policy influencing emerging markets. Central banks of major economies continue to focus on controlling inflation, while pressure from the labor market persists.

In Brazil, economic activity remains strong, and the labor market continues to be resilient. Inflation remains above the target, and recent data show an increase in price indexes. The Focus survey projections indicate inflation of 5.5% for 2025 and 4.2% for 2026. The Central Bank projects inflation of 4.0% for the third quarter of 2026.

Copom warns of risks in controlling inflation. Concerns include the possibility of persistently high service prices, an economy growing faster than expected, and the impacts of fiscal policy on interest rates. On the other hand, a sharper economic slowdown could help control inflation.

Banco Central: Copom eleva a taxa Selic para 13,25% a.a.

2. Dollar falls to lowest level since November

The exchange rate of the U.S. dollar has reached its lowest level since November, trading at R$ 5.8656. This was influenced by the Federal Reserve’s (Fed’s) decision to keep interest rates unchanged in the United States and market expectations regarding the Monetary Policy Committee (Copom) of the Central Bank of Brazil.

On this “Super Wednesday”, a term used for Wednesdays when both countries’ central banks announce their decisions, investors closely monitored Copom’s signals.

The expectation is that the Selic rate will continue to rise in the coming months, potentially exceeding 15% per year in 2025. Persistent inflation and labor market pressures reinforce this projection.

Agência Brasil: Dólar cai para R$ 5,94 e fecha no menor nível desde fim de novembro
InfoMoney: Dólar volta a cair com mercado retirando prêmios de risco e fecha a R$5,925

3. Polls show decline in Lula government’s popularity

Three recent surveys – Quaest, AtlasIntel, and Ipec – indicate a decline in the popularity of President Luiz Inácio Lula da Silva. The data shows an increase in disapproval and a decrease in the number of Brazilians who view the administration positively.

The Ipec survey found that government approval dropped from 38% in December to 33% in March, while disapproval rose from 30% to 32%. AtlasIntel recorded a decline in positive ratings from 42% to 38%, with negative ratings increasing from 39% to 41% in the same period. Meanwhile, the Genial/Quaest survey showed that government disapproval grew by five points since December, reaching 34%, while approval fell to 35%.

Another significant finding is a growth in polarization. The Quaest survey revealed that the gap between approval and disapproval reached its narrowest level since the start of Lula’s term, with disapproval at 46% versus 51% approval.

The surveys were conducted between February and March, with sample sizes ranging from 2,000 to 3,154 respondents and margins of error between 2 and 2.2 percentage points. The results suggest a gradual erosion of the government’s image, reflecting economic and political challenges.

CNN Brasil: Pesquisas mostram queda de popularidade do governo Lula

4. Brazil created 1.69 million formal jobs in 2024, highest in two years

Brazil generated 1.69 million formal jobs in 2024, the best result since 2022. This represents a 16.5% increase compared to 2023, according to data from the Ministry of Labor and Employment (MTE). The General Register of Employed and Unemployed People (CAGED) recorded 25.57 million hires against 23.87 million layoffs throughout the year.

The service sector led job creation with 929,000 new positions, followed by commerce (336,100), industry (306,900), construction (110,900), and agriculture (10,810). The labor market remains strong, with unemployment at historic lows and a record number of employed workers, according to IBGE.

Projections from the Ministry of Finance and financial analysts suggest GDP growth of around 3.5% in 2024, marking the second consecutive year of expansion above 3%. However, the last month of the year saw a loss of 535,500 jobs, reflecting seasonal effects. The official GDP data will be released in March by IBGE.

CNN Brasil: Saldo de empregos volta a subir em 2024 e soma 1,7 milhão, diz Caged

5. Government Announces Digital Platform for Payroll Loans in the Private Sector

The federal government has introduced a new system that will enable banks to offer payroll-deductible loans to private-sector workers through eSocial, a digital public services platform. With this measure, banks will be able to access labor information to facilitate loan approvals, expanding payroll credit access to approximately 42 million formal workers.

The system will allow workers to compare interest rates from different financial institutions and choose the best offer. According to Finance Minister Fernando Haddad, the initiative will bring greater transparency and competitiveness to the credit market. The platform is expected to be implemented in 2025.

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