The communication from the Monetary Policy Committee (Copom) of the Central Bank, which was as expected, opens the space for the continued decline in DI rates next Friday, after the holiday in Brazil, also considering the movement of the currency curve. The Federal Reserve’s monetary policy decision this Wednesday, assessed professionals interviewed by Reuters.
The Copom announced this fourth cut of 0.50 percentage points in the Selic base tariff, from 12.75% to 12.25% per annum, and maintained the message that further reductions of half a percentage point will be the appropriate pace for upcoming meetings. , at least in the December and January meetings.
In the statement, the BC also underlined the importance of the effect of the recent increase in long-term interest rates in the United States for the domestic scenario and, at the same time, maintained its defense of the implementation of its fiscal objectives from part of Brazil.
Copom did not change its assessment on the fiscal area due to the noise coming from President Luiz Inácio Lula da Silva’s statements on Friday on the zero headline target for 2024.
For professionals interviewed by Reuters, the Copom statement, together with the effect generated by the Fed on the North American rate curve this Wednesday, indicates the continuation of the decline in rates on Friday – provided that, on Thursday, when the Brazilian market will remain closed , no data will emerge that changes the global scenario.
“Considering the trend in Treasury yields after the Fed meeting this Wednesday, perhaps DI interest rates did not fall as much as they were expected to fall in Brazil,” underlined the chief economist of the BMG bank, Flavio Serrano. “If there are no surprises tomorrow (Thursday) with the U.S. unemployment claims data and at the open of business on Friday, with payrolls, I would expect a new low in future rates.”
This Wednesday, interest futures rates have already recorded sharp losses in Brazil, on the back of falling Treasury yields. The move came in part after the Federal Reserve kept the interest rate between 5.25% and 5.50% and, at the same time, highlighted the tighter financial conditions facing businesses and households, the which is in line with the reading that rising yields may already be working to control inflation in the United States, avoiding new interest rate increases.
“This Wednesday we witnessed an important closure of the 10-year American interest rate, by almost 20 basis points. If we add this statement from Copom to the international scenario, which presented itself in a more favorable way, there is room for the Brazilian curve can close,” commented Natalie Victal, chief economist at SulAmérica Investimentos.
However, Victal also believes that Friday will be marked by the release of the U.S. wage employment report.
“Since the BC has given great weight to the international scenario in the statement, the market will also pay attention to the payrolls.”
On the foreign exchange market, according to Serrano, the dollar’s reaction to the COPOM declaration tends to be more limited, even if prices remain in tune with what is happening in the external scenario.
In practice, the downward pressure on the dollar against the real this Wednesday – given the closing of the North American rate curve – could continue, but this also depends on the numbers that will be released on Thursday and Friday in the USA and on the dynamics of the Brazilian market itself. Typically, liquidity is lower on Fridays between a public holiday and the weekend.
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.
