Brazilian policy makers are increasing the amount of credit available for mortgages and farming by as much as 25 billion reais ($7.9 billion) as they struggle to avert a recession.
The central bank created incentives for lenders to inject as much as 22.5 billion reais into mortgages and 2.5 billion reais into farming, it said in a statement Thursday. The central bank will increase reserve requirements in other accounts to remove the equivalent of 25 billion reais from the credit market, ensuring its policies don’t fuel inflation.
“From a monetary-policy perspective, this is a balanced measure,” central bank Director Aldo Mendes said in Brasilia. “It’s neutral.”
Brazil’s government is trying to find ways to stimulate a slowing economy and protect jobs without fanning above-target inflation. The central bank announcement comes less than a week after a government report showed employers fired a record-high 97,828 people in April, including more than 23,000 construction workers.
Brazil’s construction-industry chamber, or CBIC, has been lobbying the government to boost financing for real-estate projects through cuts to reserve requirements. Thursday’s rule allows lenders to use home loans to meet some of their reserve requirements on savings accounts, creating an incentive for banks to expand their presence in the mortgage market.
The new policy comes as the central bank lifts benchmark-borrowing costs, forcing lenders such as state-owned Caixa Economica Federal, Brazil’s largest mortgage provider, to increase its lending rates.
Mendes said higher interest rates also are motivating investors to withdraw money from savings accounts, thereby limiting room for banks to boost home loans. Savings accounts in Brazil are a key source of funding for mortgages.