Last week, the Central Bank's Copom (Monetary Policy Committee) unanimously decided to raise the basic interest rate by 1 percentage point, from 11,25% to 12,25% per year.
The decision was announced during the last meeting of the board in 2024, in which the body also indicated that it intends to implement two other increases of the same intensity in the meetings of January and March 2025.
If this signaling is confirmed, the Selic will reach the level of 14,25% per year, the highest since 2016, during the government of Dilma Rousseff (PT).
Recent history of Selic
This is the third consecutive increase in the basic interest rate, which returns to the level recorded in December 2023, consolidating a contraction cycle in monetary policy.
Between August 2022 and August 2023, the Selic rate remained stable at 13,75% per year. After this period, six 0,5 point cuts and one 0,25 point cut were made, until the rate reached 10,5% per year in May 2024.
However, the scenario changed in the second half of this year. The September and November meetings brought new increases, totaling 0,75 percentage points before the current adjustment.
Selic and inflation control
The basic interest rate is the main instrument that the Central Bank has to try to control inflation – which, in the last 12 months, is at 4,87% and above the ceiling of the established target of 4,5%.
In periods of low inflation, the Central Bank reduces the Selic rate to stimulate consumption and stimulate the economy.
On the other hand, when inflation is high, as in the current scenario, the agency raises the Selic rate to restrict consumption and, consequently, reduce pressure on prices.
The Central Bank only considers reducing it when it is certain that prices are under control and the risk of high inflation is eliminated, which is not the current case.
Impact for investors
According to Bernardo Marangon, director of Prime Energy, such a significant increase in interest rates is detrimental to the development of any country, despite being a necessary measure to control inflation.
“From an investor’s point of view, the Selic rate serves as a parameter to assess the viability of their investments. This, in turn, negatively impacts the value of companies and businesses in general,” he explains.
The executive states that the consequences of interest rates becoming increasingly higher in the country are the result of “a lack of control over public spending by the Government”, which puts pressure on inflation and forces the Central Bank to raise interest rates to slow down the economy.
“However, this slowdown also directly affects the solar sector, which tends to suffer a contraction. Naturally, this leads to a cooling off in the market,” he commented.
Marangon also emphasizes that Brazil is currently experiencing an environment of great apprehension on the part of investors, in addition to a pessimistic view about the future behavior of the economy.
According to him, the only viable solution would be for the Government to signal clear measures to control public spending.
“Unfortunately, we are not seeing this signal at the moment. This situation is worrying for all sectors of the economy, and the solar sector is no exception. We will certainly be impacted by this challenging economic scenario.”
Will financing necessarily be affected?
According to Carolina Reis, director of Meu Financiamento Solar, the advancement of financing in the solar sector must always be analyzed based on various aspects of the macroeconomy and the global market.
According to her, this is a combination of factors that go far beyond the basic interest rate and also include fluctuations in the international equipment market.
“In 2022, for example, the Selic rate was at a very high level, at 13% or more, but it was still one of the best years for financing in the photovoltaic sector, breaking records. In other words, the rate did not become an impediment,” he said.
For the professional, the constant drop in the price of photovoltaic equipment – around 40% in the last year and over 80% in the last decade – has helped to cushion the increases in interest rates.
For this reason, Carolina believes that, when evaluating all these variants in the Brazilian photovoltaic market, the financing portion does not deviate from the price that the customer pays on the electricity bill, thus maintaining the high attractiveness and good return on investment in a solar system for the consumer.
“According to our assessment, more than 300 companies have been created per month this year in Brazil, mainly by integrators and new entrepreneurs in the sector. Thus, there is a consequent greater prospecting of clients for the market, which further increases the levels of financing released”, analyzes the director.
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An answer
The analysis is completely biased. Inflation is not being caused by so-called “public spending”, but rather by the global economic scenario.