The Monetary Policy Committee (Copom) of Brazil's Central Bank is expected to raise the basic interest rate (Selic) to 14.25% on March 19, 2025, amid growing protests and concerns from labor unions over high-interest rates impacting economic growth and consumption.
On March 18, 2025, labor unions across Brazil held demonstrations demanding a reduction of the Selic rate, which has significantly influenced economic conditions in the country. The protests culminated in a significant gathering in São Paulo, where hundreds assembled in front of the Central Bank's headquarters on Avenida Paulista to voice their concerns. The protest, named "National Mobilization Day - Less Interest, More Jobs," saw participation from major labor entities including Força Sindical, CUT, CSB, and CTB, as well as student group Umes.
João Carlos Gonçalves, known as Juruna from Força Sindical, emphasized the timing of the protests, stating, “This act here is a tradition and happens when the Central Bank is about to decide the interest rate.” His remarks highlight the strategic nature of the protests, aimed at influencing policy decisions that dictate the economic landscape.
Currently, the Selic rate stands at 13.25%, but analysts predict that the Copom meeting will likely lead to an increase by 1 percentage point, bringing the rate to 14.25%—a height not seen since 2016. Adilson Araújo, president of CTB, articulated the unions' opposition to this potential move, criticizing the Central Bank's perceived alignment with speculative interests. He stated, “The main objective of this act is to criticize the possibility of yet another increase in the Selic rate, which is already at 13.25%.”
The rising Selic rate is viewed by many labor leaders as detrimental to industrial investment and consumer spending, with the resulting price increases adversely affecting job creation. During the protest, Valentina Macedo, president of Umes, underscored the impact of high-interest rates on education investments, highlighting discrepancies in funding. She remarked, “The student movement continues to denounce the lack of investment in education. One of the main obstacles to Brazil’s development and education investment is the exceedingly high interest rate.”
As the protest emphasized labor concerns, the financial community is also keenly focused on the upcoming Central Bank decision, with expectations that the increase in the Selic rate will only tighten economic conditions further. This meeting marks the second under the newly appointed Central Bank President Gabriel Galípolo, further intensifying scrutiny on the government’s monetary policy approach in light of ongoing inflationary pressures.
Market analysts have voiced a consensus regarding the anticipated increase, with forecasts indicating that the rate hike could be part of a continued trend of monetary tightening. Gustavo Cruz, a strategist at RB Investimentos, commented, “The Copom is expected to raise the rate by 1 p.p., but there is uncertainty about what comes next.” His insights reflect the mixed sentiments within the market surrounding economic stability amid rising rates.
Despite the expectation of growth in the Selic rate, concerns linger regarding economic prospects. Igor Barenboim, chief economist at Reach Capital, noted that a recession in 2025 appears unlikely, attributing this outlook to bolstered private sector credit and a favorable harvest in agriculture, which may help sustain the economy.
Following the Copom’s March 19 meeting, market participants anticipate that further guidance on future rate increases will be critical. Economic indicators appear conflicted, having shown signs of cooling growth, with the Brazilian economy's GDP growth underperforming expectations in the fourth quarter of the previous year. As inflation rates continue to hover above the Central Bank's target, pressure mounts on the governing bodies to navigate these dual objectives of fostering economic growth while exercising control over prices.
In summary, the interplay between the Central Bank’s decisions, labor protests, and market expectations presents a complex narrative that underscores the profound impact of monetary policy on everyday lives. As developments unfold, the implications of the Selic rate adjustments will resonate across economic sectors, influencing investment, consumption, and overall national growth.
