Brazil’s central bank said on Wednesday that credit growth and rising asset prices do not pose a medium-term risk to the country’s financial stability, though it highlighted ongoing uncertainties that warrant caution for financial institutions. The statement came in the minutes of the Financial Stability Committee meeting held last week.
The central bank noted that credit growth has accelerated moderately since the first half of 2024, in line with economic activity, which has been performing better than expected. The country’s gross domestic product (GDP) grew more robustly than anticipated in the second quarter, prompting analysts to revise annual growth estimates to approximately 3%.
Outstanding loans in Brazil increased by 10.3% in the 12 months through July, reflecting stronger consumer demand and increased business investment. This growth in lending, while significant, has not led to immediate concerns for financial stability, according to the central bank.
However, the bank did point to some areas of concern. It noted a slight decline in the quality of credit extended to households, though this has not yet resulted in materialized risks. The bank remains vigilant, particularly regarding rural credit, where it observed a rise in risks.
For micro, small, and medium-sized enterprises, lending criteria have only slightly tightened, suggesting that risks in this sector remain stable.
With economic activity growing and inflationary pressures emerging, the central bank’s assessment comes as it prepares for its next policy decision later this month. The stronger-than-expected GDP data has also heightened market speculation about an interest rate hike to address inflation risks. The central bank’s cautious stance underscores the balance between fostering economic growth and managing potential financial vulnerabilities.
