Brazil’s outstanding credit remained stable in January, showing an annual increase of 11.7%. The default rate in non-earmarked credit rose to 4.4%, while lending spreads widened. Despite high borrowing costs and rising interest rates, credit demand remains strong, prompting policymakers to advise caution and close monitoring.
In January, Brazil’s outstanding credit stock remained stable compared to the previous month, according to central bank data released on Thursday. However, the credit stock exhibited an annual increase of 11.7%, rising from 11.5% in December. The total loans in Brazil amounted to 6.462 trillion reais (approximately $1.11 trillion), reflecting this upward trend despite high borrowing costs.
The rate of defaults for consumers and businesses in non-earmarked credit has increased, with the overall default rate rising from 4.1% to 4.4% over the past month. Additionally, lending spreads in this category have widened by 1.1 percentage points up to 28.2 percentage points. This signals potential challenges for borrowers amid rising costs.
Remarkably, despite a rigorous monetary tightening since September, which elevated Brazil’s benchmark interest rate to 13.25%, credit demand remains robust. This strong demand is bolstering consumption while simultaneously exerting pressure on inflation. Policymakers have expressed concerns regarding this credit expansion amid high borrowing costs and escalating household and corporate debts.
In the most recent minutes from the Financial Stability Committee, officials emphasized the need for caution in light of these trends. They highlighted the necessity for close monitoring, given the potential risks related to credit growth in the current economic climate.
In summary, Brazil displayed stability in outstanding credit for January, with a notable annual increase. The increase in consumer and business default rates amidst an expansive credit environment raises concerns for policymakers. The strong demand for credit, despite high borrowing costs, illustrates the complex dynamic of consumption and inflation in Brazil. Continuous monitoring and caution are needed as the economic situation evolves.
Original Source: www.tradingview.com
