Brazil’s Central Bank Assures Credit Growth Is Not a Medium-Term Concern

Brazil’s Central Bank Addresses Credit Growth and Financial Stability

Brazil’s central bank indicated on Wednesday that the current pace of credit growth and asset prices does not present a medium-term risk, although it acknowledged ongoing uncertainties that require financial institutions to remain cautious.

In the minutes from its recent Financial Stability Committee meeting, the bank reported a moderate acceleration in credit growth since the beginning of 2024, aligning with an economy that has been performing better than anticipated.

Over the 12 months leading up to July, Brazil’s outstanding loans rose by 10.3%.

Recent official data revealed that Brazil’s gross domestic product (GDP) outperformed expectations in the second quarter, leading to a series of upward revisions in annual growth projections, which are now estimated around 3%.

This robust GDP performance has also influenced speculation regarding an upcoming interest rate hike aimed at controlling inflation, as the central bank approaches its policy meeting later this month.

The central bank noted a slight decline in the quality of credit offered to households, though this has not yet resulted in a significant increase in actual risks.

"Only rural credit shows an increase in actual risk," the bank reported.

Additionally, for micro, small, and medium-sized enterprises, minor changes in lending standards indicate that the level of actual risk is expected to remain stable.