BRASILIA (Reuters)

Brazil’s central bank stated on Wednesday that credit growth and asset prices are not a medium-term concern. However, uncertainties still require financial institutions to exercise caution.

In the minutes from last week’s Financial Stability Committee meeting, the central bank noted that credit growth has been moderately accelerating since the first half of 2024, aligned with economic activity exceeding expectations.

Over the 12 months leading up to July, outstanding loans in Brazil increased by 10.3%.

Brazil’s gross domestic product (GDP) surprised positively in the second quarter, as reported by official data on Tuesday, leading to upward revisions in annual growth estimates, now around 3%.

This GDP data has raised expectations for an imminent interest rate hike to combat inflationary pressures, with the central bank gearing up for an upcoming policy decision this month.

The central bank emphasized a slight deterioration in the quality of credit offered to households; however, this has not yet resulted in increased materialized risks. It stated, “Only rural credit shows a rise in materialized risk.” Meanwhile, the slight change in lending criteria for micro, small, and medium-sized enterprises indicates that materialized risk levels should remain stable.