Borrowing costs remain high despite a mild retreat from recent peaks
Recent dynamics
Brazil's average cost of outstanding loans increased steadily through most of 2025. The indicator rose from 21.99% per year in January to 23.39% in August, and continued climbing through November before easing slightly at year-end.
The upward movement resumed in early 2026. The cost reached 23.91% in January, 24.22% in February, and peaked at 24.28% in April. Since then, the indicator has moderated only gradually, remaining close to 24% through the middle of the year.
In August 2026, the average cost stood at 24.19% per year. That was 0.80 percentage points above the 23.39% recorded in August 2025, indicating that financing costs embedded in the outstanding credit stock remain meaningfully higher than a year earlier.
Interpretation and economic signal
The Central Bank's ICC measure captures the average cost of credit operations that make up the existing portfolio of loans, financing, and leasing operations in the National Financial System. It includes outstanding operations classified as current assets, regardless of when the credit was originally contracted.
This makes the indicator different from the average interest rate on new lending. New-loan rates capture the price of credit originated during the reference period, while the ICC reflects the financing cost embedded across the existing stock of outstanding credit.
Because the outstanding portfolio reprices gradually as old loans mature and new loans enter the stock, the ICC can respond with a lag to changes in monetary policy and market funding conditions. The persistence near 24% therefore indicates that tighter financing conditions are still working through the broader credit portfolio.
Elevated borrowing costs can restrain credit demand, household consumption, and business investment, especially for borrowers that depend more heavily on bank financing. The recent stabilization below the April peak is a modest improvement, but the level remains high enough to signal continued restrictive credit conditions.
Conclusion
Brazil's average cost of outstanding loans remains elevated. Although the indicator has edged down from its recent peak, it is still above its year-earlier level and shows that high financing costs remain embedded in the existing credit stock.
The current signal is therefore one of persistent credit tightness with only limited easing at the margin. A more pronounced decline would require lower borrowing costs to feed progressively into the outstanding portfolio as loans are repriced, refinanced, or replaced by newly originated credit.