Brazil’s central bank says credit growth not a medium-term concern

BRASILIA (Reuters) – Brazil’s central bank said on Wednesday that credit growth and asset prices do not pose a medium-term concern, though it highlighted existing uncertainties that warrant ongoing caution for financial institutions.

In the minutes of its Financial Stability Committee meeting held last week, the central bank said that credit growth has been accelerating moderately since the first half of 2024, in line with economic activity, which has been growing above expectations.

In the 12 months through July, outstanding loans in Brazil have increased by 10.3%.

Brazil’s gross domestic product (GDP) surprised to the upside in the second quarter, according to official data released on Tuesday, triggering a wave of upward revisions for annual growth estimates, now hovering around 3%.

GDP data also increased bets on an imminent interest rate hike to curb inflationary pressures as the central bank prepares for its upcoming policy decision this month.

The central bank stressed in the minutes that there has been a slight deterioration in the quality of credit extended to households, but it has not yet led to an increase in materialized risks.

“Only rural credit shows a rise in materialized risk,” it said.

“For micro, small, and medium-sized enterprises, the slight variation in lending criteria suggests that the level of materialized risk should remain stable.”