Brazil bank lending slows, default rate hits highest since 2018

BRASILIA, July 28 (Reuters) - Credit growth in Brazil slowed in June, central bank data showed on Monday, as high interest rates in Latin America's largest economy weighed on borrowing and pushed up default rates.

Outstanding loans rose 0.5% from the previous month to 6.7 trillion reais ($1.20 trillion), bringing 12-month growth to 10.7%, down from 11.8% in May.

The central bank also reported that a broad default rate on non-earmarked consumer and business loans climbed to 5.0% in June from 4.9% the month before, reaching its highest level since February 2018.

Lending spreads remained stable at 31.6 percentage points.

The central bank expects credit growth to slow further, forecasting a 12-month expansion of 8.5% by year-end, compared with 11.5% in 2024.

In June, the bank raised its benchmark interest rate to a nearly 20-year high of 15%, extending a tightening cycle that began in September to fight inflation, which has already prompted 450 basis points of hikes.

Policymakers will announce their next rate decision on Wednesday, with most analysts expecting a pause following the central bank's latest communication indicating it intends to keep borrowing costs steady for a "very prolonged" period.

($1 = 5.5637 reais)