BNP Paribas has started to forecast a 0.25 percentage point increase in the Selic rate at the next central bank meeting on September 17-18, which is expected to start a cycle of hikes, citing a warming labor market, loose fiscal policy and inflation expectations firmly above target until 2027.
In addition to the September adjustment, the institute said in a statement that it expects interest rate increases of 0.50 percentage points in November and December and 0.25 percentage points in January and March, for a total increase cycle of 1.75 percentage points. The Selic has been at 10.50% since June, when the BC stopped its cycle of cuts.
“The comments of the president and directors of the Central Bank after the last meeting of the Monetary Policy Committee reinforced the openness of the COPOM regarding the next steps, but also highlighted the discomfort with current inflation and the clear discomfort with the expectations of inflation above the target by 2027,” the bank said in a note signed by economists Fernanda Guardado, former director of the Central Bank, and Laiz Carvalho.
According to the bank, the current scenario calls for greater caution on the part of the CB as the reductions in the first half of the year have slowed the disinflation process and have failed to re-anchor long-term inflation expectations.
The note stresses that recent data reiterate that the labor market remains strong and that GDP growth is above potential, with previous cuts this year still in place, but also highlights that the disinflationary process appears to have stabilized at the current level.
“Given the data-driven nature of monetary policy, we believe the balance of risks has tilted towards the need for an adjustment of the policy rate, as the current level does not appear to be sufficient to slow the economy as much as needed and to support the completion of the disinflationary trend towards the aim and, equally importantly, the re-anchoring of long-term inflation expectations,” the paper reads.
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.
