Analysis: Remarks of policymaker reduce chance of rates above 13.25%
The speech of the Central Bank’s monetary policy director, Bruno Serra Fernandes, in an event held by Goldman Sachs on Monday morning greatly reduces the chances of Brazil’s benchmark interest rate Selic being raised beyond 13.25% per year.He classified the extension of the cycle of interest rate hikes in the next meeting, in June, as likely, but not certain. He also acknowledged that he is considering two options to contain the inflation surge: raise interest rates further or postpone the Selic cuts planned for next year.In another sign of little willingness to go beyond 13.25% a year, he said that the Central Bank considers the sacrifice ratio, or the price paid in terms of economic activity to disinflate the economy faster - although he highlighted that the fight against inflation weighs more.Finally, he defended the inflation projection for 2023, the main guide for the size of the monetary tightening cycle, which stands at 3.4% and is well below the estimates of 4.1% by private-sector analysts at this month’s meeting of the Central Bank’s Monetary Policy Committee (Copom).Financial market analysts are divided about the signals given by the Copom in the last meeting. Some believe that the Central Bank signaled that it will raise interest rates to 13.25% per year from 12.75% and stop the cycle at that level. Others think that policymakers did not commit to anything and that it will continue to raise interest rates.Apparently, the signaling is at the halfway point. The economic backdrop of the meeting in May supports a likely extension of the rate hike cycle beyond the previous final rate of 12.75% in June. But, as always, the signals are conditional and will depend on the evolution of the economy by the meeting in June.Mr. Serra’s speech on Monday, however, brings more elements about the Central Bank’s own signaling and about how high the requirements for a possible extension of the cycle are.A key point is that Mr. Serra made a point of highlighting that the Central Bank has signaled a probable extension of the cycle. This is what the Copom wrote in its statement and in the minutes of the last meeting, but some analysts understood that the monetary authority was probably not referring to the extension of the cycle, but to a minor raise.In other words, what the Copom has signaled, without confirming, is the possibility of an extension of the cycle. Mr. Serra emphasized, in the event, all the uncertainties surrounding the inflation...
Para continuar a ler
PEÇA SUA AVALIAÇÃO