The Central Bank’s decision this Wednesday (June 19) to maintain the basic interest rate at 10.5% was unanimous
All directors of B.C. (Central Bank), including the 4 appointed by the current government, followed this Wednesday (June 19, 2024) the president of the monetary authority, Roberto Campos Neto, and chose to maintain the basic interest rate, the Selic, at 10, 50%.
A unanimous decision of the Copom (Monetary Policy Committee) took place despite the president Luiz Inácio Lula da Silva (PT) raised the tone and criticized Campos Neto on the eve of the announcement.
If the May meeting had a split in the collegiate, this Wednesday’s meeting (June 19) presented cohesion in monetary policy.
Financial market analysts were already expecting the Selic to be maintained, but the question was whether the Copom would be as polarized as in the previous meeting.
The current president’s nominees are:
- Gabriel Galípolo (Monetary Policy) – took office on July 12, 2023;
- Ailton Aquino (Inspection) – took office on July 12, 2023;
- Rodrigo Teixeira (Administration) – took office on January 1, 2024;
- Paulo Picchetti (International Affairs and Corporate Risk Management) – assumed the position on January 1, 2024.
CRACK IN COPOM
A divided committee is not good for this transition period in the presidency of the Central Bank. There is a fear among financial agents that the departure of Roberto Campos Neto and 2 other directors in December 2024 could make the monetary authority more tolerant of higher inflation.
Expectations for the IPCA (Broad National Consumer Price Index) are unmoored. Projections for 2025 and 2026 are on the rise and have stopped converging towards the center of the target, which is 3%.
The target tolerance is 1.5 percentage points, or 1.5% to 4.5%. The Central Bank’s job is to bring inflation to the center of the target. What economic agents think is that the departure of 3 members appointed by the government Jair Bolsonaro (PL) could change the principle of caution and make the BC more lenient, which would be a risk especially in times of international uncertainty.
Lula’s nominees waved to the market and chose to give more credibility to monetary policy and inflation control. More than that: the perception of a “Lula x Bolsonaro” rivalry within the Central Bank has diminished.
The director of Monetary Policy at the BC, Gabriel Galípolo, was one of those who voted with Campos Neto. He is one of the biggest candidates to assume the presidency of the monetary authority in 2025, when Campos Neto leaves office.
Previously, he was executive secretary of the Ministry of Finance, the number 2 minister Fernando Haddad.
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