(Picture: Jose Paulo Lacerda)
Central Bank Index Shows Recovery After December Decline
The Brazilian economy started 2025 with a growth of 0.9% in January, reversing the contraction observed in December 2024. The data was released this Monday (17th) by the Central Bank (BC) through its Economic Activity Index (IBC-Br), which considers seasonal adjustments for a better analysis of the period.
In January, the IBC-Br reached 154.6 points. Compared to the same month of the previous year, January 2024, the index registered an increase of 3.6%, without the need for seasonal adjustments in this annual comparison. In the accumulated over the last 12 months, the indicator also shows a positive performance, with a growth of 3.8%.
IBC-Br: A Tool for Monetary Policy
The Central Bank’s Economic Activity Index (IBC-Br) is used as a gauge of the Brazilian economy. It assists the BC’s Monetary Policy Committee (Copom) in making decisions about the basic interest rate, the Selic, currently set at 13.25% per year. The IBC-Br takes into account the activity of various sectors, such as industry, commerce, services, and agriculture, in addition to the volume of taxes collected.
The Selic rate is the Central Bank’s main instrument for controlling inflation. Increases in the Selic aim to cool down demand, making credit more expensive and encouraging savings, which can help reduce prices but can also slow down economic growth. On the other hand, a reduction in the Selic tends to make credit cheaper, stimulating production and consumption, but with a potential risk of increased inflation.
Inflation Remains a Point of Attention
Official inflation, measured by the Broad National Consumer Price Index (IPCA), registered an increase of 1.31% in February, mainly driven by the rise in electricity prices, according to data from the Brazilian Institute of Geography and Statistics (IBGE). In the accumulated over 12 months, the IPCA reached 5.06%, exceeding the inflation target ceiling of 3%, which has a tolerance of 1.5 percentage points up or down.
Faced with the high dollar and uncertainties regarding inflation and the global economy, the Central Bank opted to increase the Selic interest rate for the fourth consecutive time in January, consolidating a tightening cycle in monetary policy.
For the upcoming meetings, Copom has already signaled a further increase of one percentage point in the Selic, raising it to 14.25% per year at this week’s meeting. However, there was no confirmation regarding future increases at the May meeting, with the committee indicating that it will closely monitor inflation behavior.
Difference Between IBC-Br and GDP
Despite being released monthly and indicating the trajectory of economic activity, the IBC-Br uses a different methodology from that used to calculate the Gross Domestic Product (GDP), the official indicator of Brazil’s economic growth, released quarterly by the IBGE. The Central Bank emphasizes that the IBC-Br is an important tool for the formulation of monetary policy but should not be interpreted as an exact preview of the GDP.
In 2024, Brazil’s GDP registered a growth of 3.4%, marking the fourth consecutive year of expansion and the largest increase since 2021, when the economy grew by 4.8%.
Resumo em Português:
A atividade econômica brasileira cresceu 0,9% em janeiro de 2025, segundo o IBC-Br do Banco Central, revertendo a queda de dezembro. O índice atingiu 154,6 pontos, com alta de 3,6% em relação a janeiro de 2024 e 3,8% no acumulado de 12 meses. O IBC-Br auxilia o Copom nas decisões sobre a taxa Selic, atualmente em 13,25%. A inflação (IPCA) atingiu 1,31% em fevereiro, acumulando 5,06% em 12 meses, acima da meta. O Banco Central tem aumentado a Selic para conter a inflação. O IBC-Br difere do PIB, que cresceu 3,4% em 2024.
Resumen en Español:
La actividad económica brasileña creció un 0,9% en enero de 2025, según el IBC-Br del Banco Central, revirtiendo la caída de diciembre. El índice alcanzó los 154,6 puntos, con un aumento del 3,6% en comparación con enero de 2024 y del 3,8% en el acumulado de 12 meses. El IBC-Br ayuda al Copom en las decisiones sobre la tasa Selic, actualmente en el 13,25%. La inflación (IPCA) alcanzó el 1,31% en febrero, acumulando un 5,06% en 12 meses, por encima del objetivo. El Banco Central ha aumentado la Selic para contener la inflación. El IBC-Br difiere del PIB, que creció un 3,4% en 2024.
Agência Brasil
