Brazil’s outstanding credit stock was stable in January but grew by 11.7% year-on-year to 6.462 trillion reais. Default rates in non-earmarked credit increased to 4.4%, with widening lending spreads. Despite high interest rates, credit demand remains strong, prompting warnings from policymakers regarding the need for cautious monitoring of debt levels.
Brazil’s outstanding credit stock remained unchanged in January compared to December, according to central bank data. However, it showed an annual growth of 11.7%, increasing from 11.5% in December and totaling 6.462 trillion reais ($1.11 trillion). This resilience in borrowing highlights a robust demand for credit despite the prevailing high interest rates.
The consumer and business default rate in non-earmarked credit increased to 4.4% from 4.1% in December. Concurrently, lending spreads widened by 1.1 percentage points to 28.2 percentage points, indicating a higher cost of borrowing in this segment. These trends suggest a shift in credit risk perceptions among lenders.
Brazil’s monetary policy has been aggressive, with the benchmark interest rate rising to 13.25% following a series of hikes since September. A further increase of 100 basis points is anticipated next week, yet strong credit demand persists. This demand is crucial for maintaining consumption levels and poses inflationary pressure.
Policymakers issued warnings in the Financial Stability Committee minutes about the risks associated with ongoing credit expansion amid elevated borrowing costs, increasing household and corporate debt levels. They stressed the need for close monitoring and caution regarding these developments.
In conclusion, while Brazil’s outstanding credit showed stability month-over-month, its annual growth indicates a resilient credit market. The increase in default rates and lending spreads underscores the complexities of the current economic landscape. Policymakers emphasize vigilance as credit demand remains robust despite high borrowing costs, continuing to impact consumption and inflation pressures.
Original Source: www.tradingview.com
