Default rises, however doesn’t generate systemic and monetary threat, says Campos Neto

The default rate in free credit operations with banks increased from 4.1% to 4.2% from September to October

The president of central bank🇧🇷 Roberto Campos Neto, said this Thursday, 15, that the increase in defaults is discussed “seriously” by the monetary authority. “But we understand that this movement does not generate systemic or financial risk, nor that there is an increase in the so-called super-indebted people”, he replied.

The default rate on non-earmarked credit operations with banks increased from 4.1% to 4.2% from September to October. For individuals, the default rate rose from 5.8% to 5.9% from one month to the next. In the case of companies, it ranged from 19% to 2.0% in the period.

The Director of Economic Policy at the Central Bank, Diogo Guillen, said that the transfer of interest rates to credit has occurred as expected due to the Selic high cycle until the middle of this year.

TLP and TJLP

Campos Neto also repeated that the replacement of the TJLP by the TLP in the government of Michel Temer was an institutional gain. “There was an expansion of the capital market, a reduction in the neutral rate. It was a very good change that generated efficiency gains in the economy”, he commented.

He avoided commenting on the possible return of the TJLP in the next government.

fiscal expansion

The president of the Central Bank also said that the monetary authority does not have a specific account for how much the government’s fiscal expansion could be in 2023. “We do not understand what fiscal expansion account should be made as a percentage of GDP,” he said, when asked on the government’s argument that an additional expenditure allowed by the transition PEC next year would only keep expenditure stable in proportion to the Gross Domestic Product.

“We see an account of market analysts between R$ 130 billion and R$ 140 billion, but we do not do this calculation, it is not part of our framework and we use it only as an input”, answered Campos Neto.

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