The decision was unanimous and was not surprising: the Central Bank Raising the basic interest rates of the economy by one percentage pointFrom 10.75% to 11.75% annually, the highest level since April 2017. What caught the attention again was the statement accompanying the decision. In the text, the MPC (Copom) adopted more extremistconcerned with the deterioration of the global inflationary scenario, due to the war in Ukraine, and even with the deterioration of the financial situation in Brazil.
However, it cannot be said that Cobom did not comply with what it indicated in the statement of the previous meeting, in February. The monetary authority actually lowered the pace of interest rate hikes, which was 1.5 percentage points to 1 point. However, he indicated that he would have to make a new amendment of the same size at the next meeting. Economists are already beginning to expect Selic to be more than 13% this year and believe less and less in the possibility of continued interest rate cuts in 2022.
“My understanding is that, in February, Coboom saw that something around 12% would be enough to dampen inflation expectations for the coming years. In the face of all the recent shocks, BC imagines that it will be necessary to raise interest rates to a higher level,” says Gustavo Cruz, strategist In RB Investimentos. In addition to rising 1 point in May, the RBA thinks Cobom should finally raise half a point at the next meeting, taking the rate to 13.25%.
“In a best-case scenario, if the increases end with today’s signal, the end of the monetary tightening cycle will be 12.75%, which is a very high interest rate. But there is a possibility that these adjustments will continue after the next Copom conference, because the events that dictate the pace of the international market and inflation as a whole are more exciting to worry at the moment,” says Carla Argenta, chief economist at CM Capital.
“We believe that the central bank should raise the interest rate to 13.25%, that is, in addition to another increase of 100 basis points in May, we will have another increase, in June, of 50 basis points,” says Andre Perveto, Economist-President of Nekton . Inflation behavior, especially prices goods It will be key to see if Cobom will insist on higher-than-expected increases. From now on, the monetary authority is indicating that it is ready to be more curtailed, depending on how the scenario develops.
Kayo Miguel, chief economist at XP, said he has not yet changed the scenario to the Selic rate, which is 12.75%, at the end of the monetary tightening cycle. For him, the minutes of the latter, to be released soon, “have never been so important” to explain the scenarios you see BC, and even more so at a time when “the world is changing so much”.
He noted that “a lot of people are questioning whether the resolution was lighter or more stringent, and I can say that the statement includes elements from both sides.” In any case, he indicated that, like other central banks of the world, the Brazilian monetary authority will have to accept higher inflation for a longer period and a longer delay to get it to the target.
The economist also states that the exchange rate affects this context. “It is important at the moment that the real goes up – the dollar went from 5.70 R$ at the end of the year to 5.10 Rs now – helping to offset the rise in commodities. This movement tends to be continuous, and I don’t see a real drop in value again We are attracting influx, with a rise in commodities, plus Russia and Turkey are also out of the game,” Miguel said.
The progress of the war in Ukraine will be decisive
In the opinion of Joao Beck, Economist and Partner at BRA, the statement was too harsh, citing the war in Ukraine as an important risk-balance weight and pointing to a more deflationary scenario. “The market expected caution in the face of uncertainties brought by the event itself, but the statement was emphatic and also cited the lag effect that the recent rally in commodities could affect cores,” he said.
In a reference scenario, Copom’s inflation expectations have risen to 7.1% in 2022 and 3.4% in 2023. However, due to commodity price volatility goodsEspecially for fuels, the committee has adopted an alternative scenario, where the general oil barrel price will end at $100 and increase by 2% annually as of January 2023. For this scenario, Cobum’s inflation forecast is 6.3% for 2022 and 3.1% for 2023.
“Monetary policy setting starts with next year in mind, and if the projection next year is off target center, it is really worrying,” said Helena Veronese, chief economist at Azimut Wealth. to live from Infomoneyafter Cobum’s decision.
In the same conversation, Alessandra Ribeiro, an economist at Tendências Consultoria, said he believes Copom has not adjusted Selic now to assess whether the conflicting scenario has been resolved, which could lead to a settlement goods.
“Making a mistake now would have a very high cost in terms of economic activity,” Alessandra emphasized. Despite the change in flight plan, when referring to a one-point increase at the next meeting, the economist does not believe Copom will lift Selic to much higher levels. “The reason may be that it appreciates a slightly faster adjustment and is not as gradual as the market expected,” he said.
For Helena Veronese, it is hard to imagine that the monetary tightening cycle will end with a rise of one percentage point. “If the scenario improves, the next top will be smaller, but still high. Monetary policy is the biggest question in the market today,” he concludes.
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