Brazilian savings see biggest reduction in 5 years amid rising inflation

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BRASILIA – Brazilian savings accounts suffered their biggest outflow in five years in 2021, official figures showed on Thursday, as financial conditions deteriorated for families and companies amid double-digit inflation and aggressive interest rate hikes.

Brazilians boosted their bank savings by a net 7.7 billion reais in December, the lowest figure for the month in six years.

That took the annual total to a 35.5 billion reais ($6.23 billion) outflow, the first negative number since 2016. The balance of savings accounts in Latin America’s largest economy ended the year at 1.03 trillion reais.

In contrast, savings accounts grew by a record 166.3 billion reais in 2020 as the government spent heavily to combat the effects of the COVID-19 pandemic, including via cash transfers to the poorest, a program that was substantially reduced in 2021.

Also, from March, an increase in the Selic benchmark interest rate amid rising inflation made savings rates less competitive compared to other fixed income investments.

The central bank more than quadrupled its benchmark rate last year to 9.25% from 2% and has already signaled another 150 basis point hike in February.

The annual rate of inflation in mid-December stood at 10.42%, far above the central bank’s year-end target for consumer price inflation of 3.75%. The central bank acknowledged inflation has proven to be more persistent than anticipated, stirred by surging fuel and energy prices.

($1 = 5.6963 reais)

(Reporting by Marcela Ayres; Editing by Kirsten Donovan)

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