Overview
- The Central Bank's policy committee voted unanimously to reduce the Selic to 14% on Wednesday, August 5, marking the fourth straight cut in the easing cycle.
- Short-term policy eased because the committee saw an improving inflation outlook, but the cut only affects immediate money-market rates and not all borrowing costs.
- The Taxa de Longo Prazo (TLP), the reference rate for BNDES long-term loans, climbed above 8% for the first time, raising the cost of long-dated financing for businesses.
- Quarterly results at Itaú, Bradesco and Santander show banks have increased provisions for defaults and shifted toward loans backed by collateral, which tightens credit for riskier borrowers.
- Rising public-debt ratios cited by IMF estimates help explain higher long-term yields, a move that keeps investors away from Selic-linked products and limits gains from the central bank's cuts for households and SMEs.