For analysts, a possible change in inflation targets should change the trajectory of monetary policy
Sao Paulo – The financial market is unanimous in its bet that the Selicothe economy’s base interest rate will be maintained at 13.75% per annum at the meeting Monetary Policy Committee (Copom) From Central bank, which starts on Tuesday 2nd and ends tomorrow. But the assessment is that possible changes in the inflation target established by the National Monetary Council (Cmn), in addition to the level of economic deceleration and the process of reducing inflation already underway, could change the trajectory of the country’s monetary policy.
Alckmin says the government has provided the conditions for the reduction of interest rates in the country
two
Brazil has one problem which is a very high interest rate, Lula says
3
Lula says it’s impossible to invest in Brazil and suggests businessmen look for a loan in Spain
OR Bank C6 recently anticipated the start of Selic rate cuts from Q1 2024 to Q3 this year. Second Claudia Moreno, economist at the institute, the anticipation is due to the prospect that the inflation targets for 2024, 2025 and 2026 will be changed at the CMN meeting in June, from 3% to 4.5%. “The government has stressed that it wants to see cuts in Selic and has already said several times that a 3% target is low for the country,” he says.
In Moreno’s assessment, therefore, the anticipation of the cycle of cuts derives only from the change in the target, with no relation to the presentation of the fiscal framework or to the current rate of inflation. “Since the target to be pursued will be 4.5%, there will now be room for cuts, according to the model that the central bank uses for interest rates”, he assesses.
For the economist, the change in target must not discourage long-term inflation expectations, which may even rise, but not until the ceiling of the new inflation level to be pursued is reached. “But obviously there’s this risk. If these expectations rise beyond target, the BC may not have room to cut back.”
In the C6 projection, the Selic is expected to remain stable at Copom’s May, June and August meetings, with a cut of 0.25 percentage points in September, followed by cuts of 0.50 points at each meeting until May 2024. It would end 2023 to 12.5% and 2024 to 11%.
The chief economist of Economic Analysis, Andrea Galhardo, in turn, expects the cycle of cuts to start at the June meeting, with a drop of 0.25 percentage points, to 13.5%. For him, a disinflation process is underway that cannot be ignored by the monetary authority. “We have a challenging scenario, except that there is a timid but continuous improvement in the qualitative indicators of inflation”, says the economist, who sees the monetary authority’s arguments for keeping the rate at 13.75%, taking into account the level of deceleration of economic activity during the year.
“By cutting the Selic as early as June, the interest rate will remain high enough through the end of the year to drive the disinflation process,” Galhardo says. The economist believes that the BC could start cutting the Selic rate at its maximum in August, without further postponing the start of the cut cycle. “It makes no sense to have the highest real rate in the world right now. It’s a very strong and very powerful remedy: at what level are we going to put the unemployment rate?” the economist asks.
Galhardo also foresees a change in the inflation target in June, maintaining the target at 3.25% for 2023 and raising the target set for 2024 from 3% to 3.5%, with an increase of 1.5 points also in percentage bands at 2 points. “The wings are used to adapt to the setbacks of the trajectory. We have to make this change to have a goal that is credible”, he evaluates.
Source: Terra
Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.
