Central Bank of Brazil prepares to leave rates at the maximum of the cycle of 13.75%

Share your love

The market estimates that the Brazilian Central Bank will leave its benchmark interest rate unchanged next week at a cycle high of 13.75% and is likely to maintain an aggressive stance for the next year in order to temper inflation expectations, a Reuters poll showed.

It would be the first pause in a cycle of adjustments that has led to an increase in the Selic rate by a total of 1,175 basis points since the beginning of 2021, when Brazil was already suffering serious inflationary effects that now affect the main economies of the world.

The Bank’s Monetary Policy Committee, known as Copom, will leave the Selic rate at 13.75%, according to a majority of 24 of 32 economists surveyed September 12-15. A minority of eight experts expects a rise of 25 basis points to 14.0%

With price hikes in Brazil expected to start to cool off, policymakers are reluctant to follow the US Federal Reserve’s more drastic approach. They are also reluctant to take potentially disruptive action ahead of the October presidential election.

But, in a cautious tone, central bank chief Roberto Campos Neto said last week that he was not thinking of easing monetary policy either, as his priority remained bringing inflation within official targets.

“The Copom will signal that it will keep the Selic unchanged until August, maintaining a good margin over international rates and also advantageous levels of real rates,” said Jason Vieira, chief economist at Infinity Asset Management.

The country’s wide rate spreads have favored some capital inflows this year, helping to support the local currency, the real, and domestic markets ahead of elections next month, in which President Jair Bolsonaro will seek a second term.

Read Also   US Senate Approves $ 1.2 Trillion Infrastructure Plan

Brazilian consumer prices fell in August for the second month in a row due to lower fuel costs. In the 12 months to August, inflation was 8.73%, below the 10.07% observed in the immediately preceding 12 months.

Share your love

Leave a Reply

Your email address will not be published. Required fields are marked *